It has been about a month since the last earnings report for B&G Foods (BGS). Shares have lost about 9.3% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is B&G Foods due for a breakout? 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 & Sales Decline Y/Y
B&G Foods posted first-quarter 2019 results, wherein adjusted earnings came in at 44 cents per share, way below the Zacks Consensus Estimate of 51 cents and down 20% year over year. This can be attributed to reduced sales and lower gross margin, which was hurt by elevated input costs, adverse mix and inventory reduction initiatives.
B&G Foods’ net sales of $412.7 million beat the Zacks Consensus Estimate of $409 million, though it declined 4.4% year over year, owing to the sale of Pirate Brands, which was partly made up by sales from McCann’s, which was acquired last July.
Net sales from the company’s base business rose marginally to $409.5 million, owing to $7.3 million rise in net pricing, negated by a $7.1-million fall in volumes.
Net sales from Green Giant products (including Le Sueur) jumped 5.4% increased sales of both frozen and shelf stable products. Green Giant frozen net sales advanced 6.3%, backed by favorable consumer response to innovations. Green Giant shelf stable net sales went up 2.8%.
Adjusted gross margin was 24.5%, down 320 basis points year over year on account of inventory reduction initiatives, unfavorable mix, and higher input costs stemming from elevated freight, warehouse and procurement expenses. This was partially offset by increase in net pricing.
SG&A expenses dropped 10% to $38.3 million, thanks to decline in consumer marketing, warehousing, and general and administrative expenses, somewhat countered by increased non-recurring costs and costs related to acquisitions/divestitures. As a percentage of sales, SG&A expenses went down from 9.9% to 9.3%.
Adjusted EBITDA fell 15.2% to $75.8 million in the reported quarter. Adjusted EBITDA margin slumped 230 bps to 18.4% on account of the same factors that hurt the gross margin.
Other Financial Updates
The company concluded the quarter with cash and cash equivalents of $11.3 million, long-term debt of $1,636.8 million and shareholders’ equity of roughly $877.1 million. Net cash from operating activities for the first quarter of 2019 was $50.3 million.
B&G Foods repurchased 1,397,148 shares for roughly $36.9 million from mid-March 2018 to mid-March 2019. Further, the company extended its share buyback plan to mid-March 2020, with authorised repurchases revised to up to $50 million.
The company is on track with its solid pricing initiatives, which somewhat aided sales in the first quarter. Further, the company announced a few list-price hikes, which are expected to take effect in the spring season. This is likely to have a positive impact on net sales, which along with the cost-containment efforts is expected to help B&G Foods counter input cost inflation that is likely to linger throughout 2019.
All said, management reiterated its outlook and still expects net sales of $1.635-$1.665 billion for 2019. Adjusted EBITDA is anticipated to be $305.0-$320.0 million. Finally, the company projects adjusted earnings per share between $1.85 and $2.00.
How Have Estimates Been Moving Since Then?
Fresh estimates followed a downward path over the past two months. The consensus estimate has shifted -12.79% due to these changes.
Currently, B&G Foods has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. However, 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.
B&G Foods has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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