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Why Is B&G Foods (BGS) Up 16.9% Since Last Earnings Report?

It has been about a month since the last earnings report for B&G Foods (BGS). Shares have added about 16.9% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is B&G Foods due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

B&G Foods Cuts View Despite Q3 Earnings Beat: What's More?

B&G Foods lowered its guidance for fiscal 2023 on posting third-quarter results, wherein the top and bottom lines declined year over year, and sales fell short of the Zacks Consensus Estimate.

Delving Deeper

B&G Foods posted adjusted earnings of 27 cents per share, which beat the Zacks Consensus Estimate of 23 cents. However, the bottom line decreased 12.9% from the year-ago quarter.

Net sales of $502.7 million declined 4.9% year over year, mainly due to the divestiture of Back to Nature (concluded on Jan 3, 2023) and lower unit volumes. The top line missed the Zacks Consensus Estimate of $504 million.

Base business net sales dipped 3% to $502.7 million due to a fall in the unit volume, currency headwinds, reduced net pricing and the effects of the product mix.

Net sales of spices & seasonings, Clabber Girl and Maple Grove Farms rose 6.1%, 31.5%, and 2.4%, respectively. However, net sales of Green Giant (including Le Sueur), Crisco, Ortega and Cream of Wheat declined by 10.7%, 16.4%, 4.3% and 3.5%, respectively. Base net sales of all other brands in the aggregate rose 2.2%.

The adjusted gross profit of $114.1 million increased from $108 million in the year-ago period. The adjusted gross margin expanded 230 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.

SG&A expenses escalated 1.4% to $48.2 million due to higher general and administrative expenses and consumer marketing costs, somewhat negated by lower warehousing expenses, acquisition/divestiture-related and non-recurring expenses and selling costs. As a percentage of net sales, SG&A expenses escalated 0.6 percentage points to 9.6%.

Adjusted EBITDA rose 0.2% to $80.4 million due to a higher gross profit. The adjusted EBITDA margin increased 80 bps to 16% in the third quarter. Our model suggested a 9.6% decline in adjusted EBITDA and a 110-bps contraction in the adjusted EBITDA margin.

Other Updates

B&G Foods ended the quarter with cash and cash equivalents of $359.9 million, long-term debt of $1,929.1 million and total shareholders’ equity of $840.6 million.

Guidance

For fiscal 2023, management anticipates net sales in the band of $2.05-$2.07 billion compared with the earlier view of $2.11-$2.13 billion. In fiscal 2022, net sales amounted to $2,163 million ($2.16 billion).

The company anticipates adjusted EBITDA in the range of around $310-$330 million, whereas it reported $301 million in fiscal 2022.

Adjusted earnings per share (EPS) in fiscal 2023 are envisioned between 93 cents and $1.13, down from the prior view of 95 cents to $1.15. In fiscal 2022, the company posted an adjusted EPS of $1.08.

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How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month.

The consensus estimate has shifted -23.08% due to these changes.

VGM Scores

At this time, B&G Foods has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, B&G Foods has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

B&G Foods belongs to the Zacks Food - Miscellaneous industry. Another stock from the same industry, TreeHouse Foods (THS), has gained 5.1% over the past month. More than a month has passed since the company reported results for the quarter ended September 2023.

TreeHouse reported revenues of $863.3 million in the last reported quarter, representing a year-over-year change of -1.3%. EPS of $0.57 for the same period compares with $0.18 a year ago.

TreeHouse is expected to post earnings of $0.70 per share for the current quarter, representing a year-over-year change of -28.6%. Over the last 30 days, the Zacks Consensus Estimate has changed -7%.

TreeHouse has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of D.

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