Why Is B&G Foods (BGS) Up 4.8% Since Last Earnings Report?

A month has gone by since the last earnings report for B&G Foods (BGS). Shares have added about 4.8% 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 Q4 Earnings Meet Estimates, Decline Y/Y

B&G Foods posted fourth-quarter 2019 results, wherein adjusted earnings of 28 cents per share were in line with the Zacks Consensus Estimate. However, the bottom line declined 17.6% year over year. The year-over-year decline could be blamed on higher net interest expenses, which rose 13.2%. Also, base business sales declined.

B&G Foods’ net sales of $470.2 million grew 2.6% year over year and surpassed the Zacks Consensus Estimate of $461 million. The top line was buoyed by the contribution of $25.2 million from Clabber Girl (acquired in May 2019), partly negated by the divestiture of Pirate Brands (concluded in October 2018). Notably, Pirate Brands recorded sales of $2.1 million in the fourth quarter of 2018.

Net sales from the company’s base business dropped 2.4% to $445 million due to a $14.9-million fall in unit volumes, partly compensated by improved net pricing to the tune of $4.1 million. Net sales from Green Giant products (including Le Sueur) fell 0.8%.

Adjusted gross margin was 20.6%, up 160 basis points (bps) year over year. SG&A expenses declined 6.5% to $44.5 million, thanks to lower warehousing and consumer marketing costs along with a decline in certain non-recurring costs and costs related to acquisitions/divestitures. This was partly negated by a rise in general and administrative expenses and escalated selling costs. As a percentage of sales, SG&A expenses dipped 0.9% to 9.5%.

Adjusted EBITDA increased 18.8% to $69.5 million on enhanced operating performance along with contributions from Clabber Girl, partly countered by Pirate Brands’ divestiture. Operating performance was backed by gains from pricing and cost-saving efforts, partially offset by inflated input costs. Adjusted EBITDA margin expanded 200 bps to 14.8%.

Other Financial Updates

The company concluded the quarter with cash and cash equivalents of $11.3 million, long-term debt of $1,874.2 million and shareholders’ equity of $812.5 million.

In a separate press release, B&G Foods announced a quarterly cash dividend of 47.5 cents per share, payable Apr 30, to shareholders of record as of Mar 31.

Guidance

The company remains pleased with its 2019 performance, and expects its efficient pricing and cost-saving efforts to keep helping it battle cost inflation. Additionally, management remains focused on innovation and acquisitions. To this end, the company is generating growth on its plant-based innovations by Green Giant. Moving on similar lines, it announced the buyout of Farmwise last week, while it also acquired and integrated retail baking powder maker, Clabber Girl, in 2019.

All said, management expects net sales of $1.660-$1.680 billion for 2020, whereas it recorded $1,660.4 million (around $1.660 billion) in 2019.

Adjusted EBITDA for 2020 is anticipated to be $302.5-312.5 million, whereas it reported $302.5 million in the previous year. Further, the company projects adjusted earnings per share of $1.60-$1.80, whereas it recorded $1.64 in 2019.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision.

VGM Scores

Currently, B&G Foods has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. 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 this revision 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.