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Effective Pricing Actions Aid B&G Foods (BGS) Amid High Costs

B&G Foods, Inc. BGS is on track with refining its portfolio to drive long-term growth. The company is actively pursuing strategic acquisitions to boost growth. Moreover, the shelf-stable and frozen food and household product company is on track with effective pricing action amid a rising cost environment.

Let’s delve deeper.

What’s Working in B&G Foods’ Favor?

B&G Foods is reaping benefits from continued margin recovery on the back of pricing actions undertaken to counter inflationary costs through pricing and productivity efforts. In the third quarter of fiscal 2023, the company’s adjusted gross margin expanded 230 basis points (bps) to 22.7%. The gross margin expansion was backed by increased net pricing (relative to input costs), reduced transportation and warehousing costs and moderation of input cost inflation.

B&G Foods has a successful track record of acquisition-led growth. B&G Foods acquired the Crisco brand from J.M. Smucker in December 2020. Before this, the company acquired Farmwise (in February 2020). It also acquired an integrated retail baking powder maker, Clabber Girl (acquired in May 2019). In its last earnings call, management highlighted that Clabber Girl continued its strong performance, with brand sales rising 31.5% year over year in the third quarter of 2023.

The company’s focus on reshaping its portfolio is evident from its emphasis on making prudent divestitures. To this end, management recently unveiled the sale of its Green Giant U.S. shelf-stable product line to Seneca Foods Corporation. BGS plans to utilize the net proceeds from this sale to repay long-term debt. Management sold the Back to Nature brand in January 2023 — to exit the small, fragmented lower and margin snacks portfolio. The company is on track to analyze other divestiture possibilities to enhance portfolio focus and reduce debt.

Zacks Investment Research
Zacks Investment Research


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High Costs Hurt

B&G Foods has been grappling with higher selling, general and administrative (SG&A) expenses for a while. In the third quarter of fiscal 2023, B&G Foods’ SG&A expenses escalated 1.4% to $48.2 million due to higher general and administrative expenses and consumer marketing costs. As a percentage of net sales, SG&A expenses escalated 0.6 percentage points to 9.6%.

All said, whether the upsides can help B&G Foods stay afloat amid such high costs is yet to be seen.

B&G Foods’ shares have declined 6.4% in the past three months compared with the industry’s 2.9% decline.

Some Solid Picks

MGP Ingredients, Inc. MGPI produces and markets ingredients and distillery products to the packaged goods industry. The company currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for MGP Ingredients’ current financial year sales and earnings suggests growth of almost 6% and 14.2%, respectively, from the year-ago reported figures. MGPI has a trailing four-quarter earnings surprise of 16.2% on average.

Celsius Holdings CELH, which offers functional drinks and liquid supplements, carries a Zacks Rank #2. CELH delivered an earnings surprise of 81.6% in the third quarter of 2023.

The Zacks Consensus Estimate for Celsius Holdings’ current financial year sales and earnings suggests growth of 98.5% and 184.1%, respectively, from the year-ago reported numbers.

Vital Farms Inc. VITL offers a range of produced pasture-raised foods. It currently has a Zacks Rank #2. VITL has a trailing four-quarter earnings surprise of 145% on average.

The Zacks Consensus Estimate for Vital Farms’ current financial year sales suggests growth of 29.4% from the year-ago reported figure.

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B&G Foods, Inc. (BGS) : Free Stock Analysis Report

MGP Ingredients, Inc. (MGPI) : Free Stock Analysis Report

Celsius Holdings Inc. (CELH) : Free Stock Analysis Report

Vital Farms, Inc. (VITL) : Free Stock Analysis Report

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Zacks Investment Research