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3 Reasons Why B&G Foods Stock Has Rallied More Than 30% YTD

Zacks Equity Research
·4 min read

Food companies are benefiting from the burgeoning demand owing to increased at-home consumption and pantry-loading trends amid coronavirus. The packaged food space is especially gaining as the lockdown has prompted shoppers to buy and pile up packaged food and beverages. This has boosted sales of several food players, including B&G Foods, Inc. BGS. Additionally, the company has been gaining on contributions from buyouts and its efficient pricing strategies.

Courtesy of such upsides, this Zacks Rank #1 (Strong Buy) stock has surged 33.4% so far this year against the industry’s drop of 8.5%.  Moreover, the company has a VGM Score of B. Certainly, B&G Foods appears to be a scrumptious stock at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Coronavirus-Led Demand & View Fuel Estimates

Consumers’ rising demand amid the coronavirus-led stockpiling aided B&G Foods’ performance in first-quarter 2020, wherein both top and bottom lines rose year over year and beat the Zacks Consensus Estimate. Results were backed by solid pricing and gains from buyouts along with increased demand led by the COVID-19 outbreak. The company has been witnessing a rapid increase in demand for its products since the second half of March 2020, thanks to the coronavirus-led stockpiling and higher at-home consumption. In this regard, B&G Foods’ higher net sales to mass merchants, warehouse clubs, supermarkets, wholesalers and e-commerce consumers have more than offset the lower demand from Foodservice clients. Management informed that solid retail consumption was a major driver.

As reported by Nielsen, consumption for all of B&G Foods rose 12% for the 13-week period ended Mar 28, including an 87% surge in the last two weeks of March. Moreover, this trend continued in April as net sales during the month increased 60% year over year. The burgeoning demand trend continued till May beginning. Even Kellogg K, Kraft Heinz KHC and Flowers Foods FLO benefited from demand stemming from the coronavirus-led stock hoarding. Meanwhile, B&G Foods anticipates net sales and adjusted EBITDA for fiscal 2020 to significantly exceed the guidance provided in February. We note that the consensus mark for the third quarter and 2020 earnings per share have moved north by 59.5% to 59 cents and 28.7% to $2.15 over the past 60 days.

Buyout Gains, Solid Green Giants Performance

The company is actively pursuing acquisitions to boost growth. To this end, B&G Foods recently took over Farmwise (Feb 2020), while it also acquired and integrated retail baking powder maker, Clabber Girl (in May 2019). Incidentally, Clabber Girl contributed to first-quarter 2020 top line by $18.7 million. Apart from this, the company has acquired notable brands, such as Back to Nature, Green Giants, Victoria, Mama Mary, Specialty Brands, Rickland Orchardsn, TrueNorth, McCann’s and Ortega.

Markedly, Green Giants has emerged as one of the leading brands of the company. During the first quarter, net sales from Green Giant products (including Le Sueur) increased 16.3%. The company is driving growth in its plant-based innovation by Green Giant and has a robust pipeline and new product innovation lined up, especially for this business. In fact, Green Giant is expected to be a leading brand in 2020 as well, courtesy of its range of innovation across frozen food categories outside frozen vegetables.

Pricing & Saving Efforts

The company’s pricing initiatives have played an important role in strengthening revenues and profitability for a while now. During the first quarter, the company’s net sales benefited from a rise in net pricing to the tune of $9.2 million. Further, the company has been strategically tackling cost inflation through solid saving efforts. For 2020, management previously projected savings of $15-$20 million. This along with pricing is likely to help B&G Foods counter cost inflation.

These upsides are likely to keep B&G Foods’ placed well on the growth trajectory.

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