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B&G Foods (BGS) Q3 Earnings Beat Estimates, Sales Rise Y/Y

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B&G Foods, Inc. BGS posted yet another quarter of robust results, when it reported third-quarter 2020 numbers. Top and bottom lines grew year over year and surpassed the Zacks Consensus Estimate for the third time in a row. Results continued to gain on the rising demand owing to the pandemic-induced increased at-home consumption. Apart from this, the impact of an extra week in the third quarter of 2020 aided results. Management expects the robust demand trend to continue throughout the fourth quarter and in 2021.

Additionally, the company is encouraged about its pending acquisition of the Crisco brand, which is likely to conclude in the fourth quarter of 2020 and immediately drive the company’s bottom line and free cash flow.

Quarterly Highlights

The company posted adjusted earnings of 74 cents per share, which easily beat the Zacks Consensus Estimate of 64 cents. Moreover, the bottom line grew 37% year over year.

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

Net revenues of $495.8 million advanced 22% year over year and surpassed the Zacks Consensus Estimate of $454 million. Revenues were backed by burgeoning demand for the company’s products amid the pandemic, along with the impact of an extra week in the quarter under review. Management estimates the additional week to have contributed about $35 million to B&G’s net sales. Apart from this, the top line gained from Farmwise’s buyout (concluded in Feb 2020) to the tune of $0.4 million.

Net sales from the company’s base business rallied 21.9% to $495.4 million on an $89.8-million increase in unit volumes, partly negated by a slight dip of $0.4 million in net pricing and currency headwinds of $0.3 million. Net sales from one of the company’s leading brands, Green Giant products (including Le Sueur), gained 31.5% in the quarter.

Apart from this, B&G Foods’ spices & seasonings, Victoria, Ortega, Cream of Wheat and Maple Grove Farms businesses registered sales increases of 29.5%, 55.9%, 17.2%, 18.2% and 3%, respectively. Net sales from all other brands grew 11.1%.

Adjusted gross profit rose 23.4% to $136.1 million and the adjusted gross margin was 27.5%, up 30 basis points (bps) year over year. SG&A expenses increased 13.9% to $43.4 million, thanks to a rise in general and administrative expenses, marketing expenses, warehousing expenses and selling expenses. This was partially offset by a decline in some non-recurring costs and costs related to acquisitions/divestitures. As a percentage of sales, SG&A expenses dropped 0.6 percentage points to 8.8%.

Adjusted EBITDA increased 21.3% to $104.6 million, driven by the impact of higher base business volumes on sales owing to COVID-19-related demand, as well as the impact of an extra week. Adjusted EBITDA margin fell 10 bps to 21.1%.

Other Financial Updates

The company concluded the quarter with cash and cash equivalents of almost $57 million, long-term debt of $1,804.6 million and shareholders’ equity of $843.4 million. Capital expenditures for 2020 are likely to be nearly $40-45 million.

Other Developments & Guidance

On Oct 26, 2020, B&G Foods unveiled that it had inked a deal to buy the Crisco brand from J.M. Smucker (SJM) for about $550 million in cash. As part of the buyout, B&G Foods is also acquiring a manufacturing facility and warehouse in Cincinnati, OH. It anticipates the acquisition to conclude in the fourth quarter of 2020. In 2021, the acquired business is expected to keep gaining on the pandemic-induced demand. Management expects the buyout to generate annual net sales of roughly $270 million, adjusted EBITDA of $65-$70 million and adjusted earnings per share of 45-50 cents in 2021.

For 2020, management anticipates net sales of around $1.95-$1.97 billion. Adjusted EBITDA is expected to be nearly $360-$370 million. Finally, the bottom line is envisioned to be roughly $2.30-$2.40 per share. The Zacks Consensus Estimate is currently pegged at $2.22. Incidentally, the company’s net sales and adjusted earnings per share came in at $1,660.4 million (roughly $1.66 billion) and $1.64, respectively. Markedly, management’s guidance for 2020 doesn’t include any impact from the pending takeover of the Crisco brand.
 
This Zacks Rank #3 (Hold) stock has dropped 4.5% in the past three months compared with the industry’s decline of 2.1%.

Looking for Solid Food Stocks? Check These

United Natural UNFI, which carries a Zacks Rank #1 (Strong Buy), has a trailing four-quarter earnings surprise of 4.8%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

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Blue Apron APRN, which also carries a Zacks Rank #2, has a trailing four-quarter earnings surprise of 30.3%, on average.

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