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B&G Foods (BGS) Q1 Earnings & Sales Decline Y/Y, Stock Down

Zacks Equity Research

B&G Foods, Inc. BGS posted first-quarter 2019 results, wherein both the top and the bottom line declined year over year. Earnings in fact missed estimates for the fourth consecutive quarter. While earnings were hurt by lower sales and soft margins, sales were hit by Pirates Brands’ divestiture to Hershey HSY, somewhat compensated by the McCann acquisition. Consequently, shares of the company lost 5.2% during yesterday’s after-hour trading session.

Q1 Highlights

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, Inc. Price, Consensus and EPS Surprise



B&G Foods, Inc. Price, Consensus and EPS Surprise | B&G Foods, Inc. Quote

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.

Outlook

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. The Zacks Consensus Estimate is currently pegged at $1.88.

The Zacks Rank #3 (Hold) stock has gained 6.6% in the past month, compared with the industry’s growth of 3.3%.

Check These Solid Food Stocks

Smucker SJM has long-term earnings per share growth rate of 5.9% and a Zacks Rank #2 (Buy).  You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

General Mills GIS has a Zacks Rank #2 and long-term earnings per share growth rate of 7.5%.

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