B&G Foods (BGS) Q3 Earnings Miss Estimates, Sales Up Y/Y
B&G Foods, Inc. BGS reported third-quarter fiscal 2021 numbers, with the bottom line declining year over year and missing the Zacks Consensus Estimate. The top line increased year over year and surpassed the consensus mark. The company continued to see higher demand for its products as consumers are cooking and baking at home. Management undertook pricing initiatives to counter the impacts of inflation in key input costs during the quarter.
Quarterly Highlights
The company posted adjusted earnings of 55 cents per share, which missed the Zacks Consensus Estimate by a penny. The bottom line declined 25.7% from the year-ago quarter’s reported figure.
Net sales of $515 million increased 3.9% year over year on the back of gains from the Crisco buyout (acquired on Dec 1, 2020). Net sales from Crisco contributed $71.2 million to total net sales. This was somewhat offset by unfavorable year-over-year comparisons, thanks to a spike in demand in the third quarter of fiscal 2020. Also, the lesser reporting week in the quarter under review was a downside. Net sales increased 26.7% compared with pre-pandemic levels (third-quarter 2019). On a two-year compound annual growth basis compared with pre-pandemic levels, net sales increased 12.6% in the quarter under review. The top line surpassed the Zacks Consensus Estimate of $494.7 million.
Base business net sales declined 10.5% to $443.7, reflecting a unit volume decline of $68.5 million. This was somewhat offset by an increase in net pricing and favorable product mix to the tune of $14.5 million. Also, 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 increased 4.5%.
B&G Foods, Inc. Price, Consensus and EPS Surprise
B&G Foods, Inc. price-consensus-eps-surprise-chart | B&G Foods, Inc. Quote
Net sales of Ortega increased 4.2%. However, net sales of Green Giant (including Le Sueur), spices & seasonings, Clabber Girl, Cream of Wheat and Maple Grove Farms fell 10.7%, 13.1%, 17.2%, 7.4% and 2.4%, respectively. Sales of all other brands in the aggregate fell 12.5%. The company notified that net sales for Green Giant, spices & seasonings, Maple Grove Farms, Ortega, Cream of Wheat and Clabber Girl were higher compared with second-quarter fiscal 2019 (pre-pandemic period) figures.
Gross profit fell from $136 million to $105.7 million, thanks to higher than anticipated input cost inflation. This includes escalated raw materials and transportation expenses. The Zacks Rank #4 (Sell) company expects input cost inflation to be significantly higher year over year in the fourth quarter of 2021. The company expects to keep witnessing industry-wide cost inflation during fiscal 2022. The company 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, B&G Foods does not expect to fully offset the additional cost headwinds. Gross margin contracted to 20.5% from 27.4% reported in the year-ago quarter.
SG&A expenses increased 6.9% to $46.4 million, thanks to a rise in acquisition/divestiture-induced and non-recurring expenses as well as warehousing costs. These were somewhat offset by lower selling expenses, consumer marketing expenses as well as general and administrative costs. As a percentage of net sales, SG&A expenses expanded 0.2 percentage points to 9%.
Adjusted EBITDA fell 8.1% to $96.2 million. Adjusted EBITDA was mainly hurt by unfavorable year-over-year comparisons with a spike in pandemic-led demand. Also, industry-wide input cost inflation and lower reporting week in the third quarter of 2021 was an upside. These were somewhat offset by positive impact from the Crisco acquisition. Adjusted EBITDA, as a percentage of net sales, came in at 18.7%, down from 21.1% reported in the year-ago quarter.
Other Updates
B&G Foods concluded the quarter with cash and cash equivalents of $27.1 million, long-term debt of $2,406.8 million and total shareholders’ equity of $830.6 million.
During the quarter, B&G Foods revealed plans to sell its Portland, Maine manufacturing facility. The transaction is likely to be concluded during the first quarter of fiscal 2022.
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Guidance
B&G Foods reaffirmed its net sales guidance for fiscal 2021. Management anticipates net sales in the range of $2.05-$2.10 billion. This includes a positive impact from the acquisition of Crisco brand. The company expects adjusted EBITDA for fiscal 2021 in the range of $358-$365 million.
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 mitigate cost-related headwinds. Due to the coronavirus outbreak’s uncertainties, the company did not provide a detailed guidance for fiscal 2021.
B&G Foods’ shares have gained 11.7% in the past three months compared with the industry’s growth of 2.2%.
Solid Food Bets
United Natural Foods, Inc. UNFI, currently sporting a Zacks Rank #1 (Strong Buy), has a trailing four-quarter earnings surprise of 13.1%, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Chef's Warehouse CHEF, currently carrying a Zacks Rank #2 (Buy), has a trailing four-quarter earnings surprise of 279%, on average.
The Hain Celestial Group, Inc. HAIN, currently carrying a Zacks Rank #2, has a trailing four-quarter earnings surprise of 21.2%, on average.
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