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B&G Foods (BGS) More Than Doubles in 6 Months on Solid Demand

Zacks Equity Research
·5 min read

Though coronavirus has jeopardized several economic activities, there are several consumer staple companies that appear to be on safe grounds. In fact, many of these companies are benefiting from the burgeoning demand for essential items amid the pandemic-led increased at-home consumption and pantry-loading trends. One such player largely riding on these trends is B&G Foods, Inc. BGS, whose shares have more than doubled in the past six months against the industry’s decline of 0.6%.

Also, this Zacks Rank #2 (Buy) stock has comfortably outperformed the S&P 500 and the Zacks Consumer Staples sector’s respective declines of 0.7% and 7% in the same time frame. This frozen and household food provider’s VGM Score of A is another attraction. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Pandemic-Led Demand Aids

The company has been benefiting from consumers’ rising demand amid the coronavirus-led increased at-home consumption and pantry-loading trends. These continued to aid the company’s performance in second-quarter 2020, wherein both top and bottom lines surged 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. Notably, the company’s 85% of brands witnessed sales growth, including Green Giant, Cream of Wheat, Ortega, McCann’s, Victoria and Clabber Girl, among others.

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. Markedly, net sales surged more than 60% in April, about 50% in May and 10% in June. 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 demand from Foodservice clients. Solid retail consumption continued to be a major driver in the second quarter. As reported by Nielsen, consumption for B&G Foods’ total portfolio jumped 34.5% for the 13-week period ended Jun 27.

BG Foods, Inc. Price, Consensus and EPS Surprise

BG Foods, Inc. Price, Consensus and EPS Surprise
BG Foods, Inc. Price, Consensus and EPS Surprise

BG Foods, Inc. price-consensus-eps-surprise-chart | BG Foods, Inc. Quote

Management expects sales to remain elevated, as it expects the pandemic-led increased stay-at-home, work-from-home and cook-at-home trends to stay. B&G Foods anticipates net sales and adjusted EBITDA for fiscal 2020 to significantly exceed the guidance provided in February. Encouragingly, the consensus mark for 2020 has climbed a couple of cents to $2.22 per share over the past 30 days. Other than B&G Foods, other food stocks gaining from the increased demand trends include General Mills GIS and Kellogg K, to name a few.

Growth Drivers

B&G Foods has been benefiting from a robust brand portfolio, thanks to its focus on acquisitions and innovation. To this end, the company recently acquired Farmwise (in February 2020), while it also acquired and integrated retail baking powder maker, Clabber Girl (acquired in May 2019). Incidentally, Farmwise and Clabber Girl made contributions of $0.6 million and $15 million, respectively, to B&G Foods’ second-quarter top line. 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 the company’s largest brand. During the second quarter, net sales from Green Giant products (including Le Sueur) increased a solid 45.4%. The company will remain committed to product innovation and other brand enhancement investments in the second half of 2020. Toward this end, the company particularly has solid plans for the Green Giant brand.

Apart from this, the company’s strategic pricing initiatives have been yielding results. During the second quarter, the company’s base business sales benefited from a rise in net pricing to the tune of $15.3 million. B&G Foods is also benefiting from higher online sales. During the second quarter, the company gained a number of online customers, thanks to social-distancing trends. E-commerce sales form about 3-5% of the company’s sales and are accelerating with pace, mainly attributable to efficient delivery services of the company’s retail customers like Amazon AMZN. The company expects solid e-commerce trends to continue and is also making investments to enhance its e-commerce capacity.

Clearly, B&G Foods appears to be in solid shape and is most likely to keep its impressive show on.

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