It has been about a month since the last earnings report for B&G Foods (BGS). Shares have added about 14.5% 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 Q1 Earnings Beat Estimates, Sales up
B&G Foods posted robust first-quarter 2020 results. Adjusted earnings of 46 cents per share beat the Zacks Consensus Estimate of 43 cents. Moreover, the bottom line increased 4.5% year over year. The upside can be attributed to increased sales.
B&G Foods’ net sales of $449.4 million rose 8.9% year over year and surpassed the Zacks Consensus Estimate of $420 million. The top line was buoyed by the contribution of $18.7 million from Clabber Girl (acquired in May 2019). Moreover, higher demand owing to the coronavirus outbreak supported the upside.
Net sales from the company’s base business rose 4.3% to $430.5 million on $8.2-million increase in unit volume along with improved net pricing to the tune of $9.2 million. Net sales from Green Giant products (including Le Sueur) increased 16.3%.
Adjusted gross margin was 23.9%, down 60 basis points (bps) year over year. SG&A expenses increased 4.4% to $40 million, thanks to rise in general and administrative expenses as well as escalated selling costs. This was partially offset by lower warehousing and consumer marketing costs along with a decline in certain non-recurring costs and costs related to acquisitions/divestitures. As a percentage of sales, SG&A expenses inched up rose 0.4% to 8.9%.
Adjusted EBITDA increased 6.4% to $80.7 million driven by improved sales owing to the pandemic and contributions from Clabber Girl. Adjusted EBITDA margin contracted 40 bps to 18%.
The companyconcluded the quarter with cash and cash equivalents of $127.1 million, long-term debt of $1,974.9 million and shareholders’ equity of $796.3 million.
The company has been witnessing a rapid increase in demand for its products since the second half of March 2020, thanks to 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 lower demands from Foodservice clients. Moreover, this trend continued in April as net sales during the month increased 60% year over year.
To maintain financial flexibility amid the pandemic, B&G Foods has drawn down $100.0 million from its revolving credit facility in the middle of March. Due to uncertainties related to the coronavirus outbreak, management has refrained from providing any guidance for fiscal 2020. Nevertheless, it anticipates net sales and adjusted EBITDA for fiscal 2020 to significantly exceed the previously-provided guidance in February.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision. The consensus estimate has shifted 61.64% due to these changes.
At this time, B&G Foods has an average Growth Score of C, 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise B&G Foods has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
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