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B&G Foods (BGS) Q2 Earnings Miss Estimates, Sales Down Y/Y

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B&G Foods, Inc. BGS reported second-quarter fiscal 2021 numbers, with the top and the bottom line declining year over year. Earnings missed the Zacks Consensus Estimate, while sales surpassed the same.

The company encountered challenges in the quarter, thanks to unfavorable comparisons with the year-ago quarter wherein it witnessed pandemic-induced spike in pantry loading. That being said, net sales performance was better than 2019 levels (pre-pandemic period). The company is seeing sustained increase in the number of Americans preparing and eating meals at home compared with pre-pandemic levels. However, management is seeing adverse impacts stemming from inflation on key input costs across its portfolio.

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

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

B&G Foods, Inc. price-consensus-eps-surprise-chart | B&G Foods, Inc. Quote

Quarterly Highlights

The company posted adjusted earnings of 41 cents per share, which missed the Zacks Consensus Estimate of 44 cents. The bottom line declined from 71 cents reported in the year-ago quarter.

Net sales of $464.4 million fell 9.4% year over year mainly due to unfavorable year-over-year comparisons thanks to spike in demand and pantry loading trends in the second quarter of fiscal 2020. This was somewhat offset by gains from the Crisco buyout (acquired on Dec 1, 2020). Net sales from Crisco contributed $58.4 million to total net sales. The top line surpassed the Zacks Consensus Estimate of $436.9 million. On a two-year compound annual growth basis, compared with pre-pandemic levels, net sales improved 11.8% in the quarter under review.

Base business net sales slumped 20.8% to $405.9 million reflecting unit volume decline of $115.4 million. This was somewhat countered by improved net pricing and favorable product mix to the tune of $6.2 million. Impacts of favorable currency rates worth $2.6 million also contributed to the metric. On a two-year compound annual growth basis, compared with pre-pandemic levels, base business net sales grew 3.5%.

Net sales of Maple Grove Farms and spices & seasonings increased 11.7% and 0.7% year over year, respectively. Net sales of green Giant (including Le Sueur), Clabber Girl, Ortega and Cream of Wheat declined 35.6%, 33.5%, 12.7% and 20.8%, respectively. Net sales of all other brands in the aggregate fell 23%. The company notified that net sales for spices & seasonings, Ortega, Cream of Wheat, Maple Grove Farms and Clabber Girl were higher when compared with the second quarter of fiscal 2019 (pre-pandemic period).

Gross profit fell from $134.1 million to $111.6 million owing to higher than anticipated input cost inflation, which includes significant rise in raw materials and transportation costs. Management envisions input cost inflation to be significantly higher year over year in the second half of 2021. That being said, the company is on track to counter escalated inflation through short-term supply contracts and advance commodities purchase agreements among others. Gross margin contracted to 24% from 26.2% reported in the year-ago quarter.

SG&A expenses increased 6.2% to $47.1 million, thanks to rise in consumer marketing costs, acquisition/divestiture-induced and non-recurring expenses as well as warehousing costs. These were somewhat offset by lower selling expenses as well as general and administrative costs. As a percentage of net sales, SG&A expenses expanded 1.4 percentage points to 10.1%.

Adjusted EBITDA fell 18.3% to $83.8 million. Adjusted EBITDA, as a percentage of net sales, came in at 18%, down from 20% reported in the year-ago quarter. Adjusted EBITDA before pandemic-induced costs was $85 million, down 20.5%. The company incurred COVID-19 expenses of $1.2 million in the reported quarter. These costs mainly include temporary enhanced compensation for manufacturing employees, compensation paid to manufacturing employees, while in quarantine as well as expenses associated with other precautionary health and safety measures.

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Other Updates

The company concluded the quarter with cash and cash equivalents of $40.3 million, long-term debt of $2,325.9 million and total shareholders’ equity of $841.6 million.

Guidance

B&G Foods reaffirmed its net sales guidance for fiscal 2021. Management anticipates net sales of $2.05-$2.10 billion. This includes positive impact from the acquisition of Crisco brand.

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 ingredients, packaging and transportation. Although the company is undertaking various revenue enhancing and cost-control measures, it is yet to be seen if these initiatives can help mitigate such cost-related headwinds. Due to the uncertainties surrounding the coronavirus outbreak, the company did not provide detailed guidance for fiscal 2021.

This Zacks Rank #3 (Hold) stock has gained 1.5% so far this year compared with the industry’s growth of 0.4%.

Solid Food Bets

Medifast, Inc. MED, currently sporting a Zacks Rank #1 (Strong Buy), has a trailing four-quarter earnings surprise of 16%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

Darling Ingredients Inc. DAR, currently carrying a Zacks Rank #2 (Buy), has a trailing four-quarter earnings surprise of 29.8%, on average.

The J. M. Smucker Company SJM, currently carrying a Zacks Rank #2, has a trailing four-quarter earnings surprise of 17.7%, on average.


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