B&G Foods (BGS) Down 8.3% Since Last Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for B&G Foods (BGS). Shares have lost about 8.3% 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 catalysts.
B&G Foods Q4 Earnings Lag Estimates: Input Costs High
B&G Foods reported fourth-quarter fiscal 2021 numbers. The company posted adjusted earnings of 39 cents per share, which missed the Zacks Consensus Estimate of 42 cents. However, the bottom line grew 11.4% from the year-ago quarter’s reported figure.
Net sales of $571.8 million increased 12.1% year over year, mainly due to gains from the Crisco buyout (acquired on Dec 1, 2020). An additional two months of net sales from Crisco contributed $68 million to net sales. This was somewhat offset by supply-chain hurdles stemming from the Omicron variant. Net sales increased 21.6% compared with pre-pandemic levels (the fourth quarter of 2019). On a two-year compound annual growth basis, net sales increased 10.3% in the quarter under review. The top line fell short of the Zacks Consensus Estimate of $585 million.
Base business net sales declined 1.1% to $503.6 million, reflecting a unit volume decline of $33.8 million. This was somewhat offset by an increase in net pricing and a favorable product mix to the tune of $27.4 million. Also, a positive impact of foreign currency rates was an upside. On a two-year compound annual growth basis compared with pre-pandemic levels, base business net sales dipped 0.2%.
Net sales of Ortega, Clabber Girl and spices & seasonings declined 7.7%, 12.8% and 13.6%, respectively. However, net sales of Green Giant (including Le Sueur), Cream of Wheat and Maple Grove Farms rose 3.9%, 1% and 3.4%, respectively. Sales of all other brands in the aggregate jumped 3.8%.
Adjusted gross profit came in at $112.7 million compared with $108.8 million in the year-ago period. Adjusted gross margin of 19.7% contracted 160 basis points (bps). The fourth-quarter 2021 gross margin was hurt by greater-than-anticipated input cost inflation. This includes escalated raw materials and transportation expenses.
Management expects the input cost inflation to have a considerably industry-wide effect in fiscal 2022. BGS is on track to mitigate the impact of inflation by undertaking cost-saving initiatives, increasing list prices as well as locking in prices via short-term supply contracts and advance commodities purchase agreements. That being said, these may not fully offset additional cost headwinds.
SG&A expenses declined 10.5% to $52.3 million. As a percentage of net sales, SG&A expenses improved 2.4 percentage points to 9.1%. Adjusted EBITDA increased 16% to $85.1 million due to gains from Crisco’s acquisition, somewhat negated by input cost inflation and supply-chain hurdles. Adjusted EBITDA margin contracted 50 bps to 14.4%.
Other Updates
B&G Foods concluded the quarter with cash and cash equivalents of $33.7 million, long-term debt of $2,267.8 million and total shareholders’ equity of $920.3 million.
Guidance
For fiscal 2022, management anticipates net sales in the range of $2.07-$2.125 billion. In fiscal 2021, net sales amounted to $2,056.3 million (nearly $2.06 billion). The company expects adjusted EBITDA for fiscal 2022 in the range of $358-$368 million compared with $358 million recorded in fiscal 2021. Adjusted earnings per share (EPS) in fiscal 2022 are envisioned to be nearly in the band of $1.70-$1.85. In fiscal 2021, the metric came in at $1.88.
Management expects to keep witnessing solid consumer demand for its products compared with pre-pandemic levels (in 2019). However, management expects to keep seeing significant cost inflation for inputs, such as ingredients, packaging and transportation. Although the company is undertaking various revenue-enhancing and cost-control measures, it is yet to be seen how effective these initiatives turn out. Apart from this, other pandemic-related factors, such as the duration of social distancing and stay-at-home trends, operation of manufacturing facilities, the company’s ability to procure ingredients and other raw materials and supply-chain status among others, may impact the performance.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
The consensus estimate has shifted -13.73% due to these changes.
VGM Scores
Currently, B&G Foods has a great Growth Score of A, though it is lagging a lot 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 20% 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 these revisions indicates a downward shift. It's no surprise 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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