Pricing Actions Aid B&G Foods (BGS), Lower Volumes Ail
B&G Foods, Inc. BGS benefits from solid pricing actions amid an inflationary environment. The shelf-stable and frozen food and household product company is on track with refining its portfolio to drive long-term growth. However, lower volumes are a hurdle for the company.
Let’s delve deeper.
Pricing Actions on Track
Efficient pricing has been protecting B&G Foods’ margins. The company’s pricing actions caught up with the higher costs and inflation during the second quarter of fiscal 2023. The quarterly gross margin expanded to 21.8% from 16% reported in the year-ago quarter. As a percentage of net sales, its adjusted EBITDA stood at 14.6%, up from 11.3% reported in the year-ago quarter. The company continues to see inflation across most of its portfolio, although the pace of inflation has slowed.
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Portfolio Refining Efforts Solid
The Zacks Rank #3 (Hold) company has a successful track record of acquisition-led growth. On May 5, 2023, the company acquired the frozen vegetable manufacturing operations of Growers Express, LLC., which works well for its Green Giant brand operations.
Management acquired the Crisco brand in December 2020. Before this, the company acquired Farmwise (in February 2020), while BGS also bought an integrated retail baking powder maker, Clabber Girl (in May 2019). B&G Foods has also acquired notable brands such as Green Giants, Victoria, Mama Mary, TrueNorth, McCann’s and Ortega.
The company’s focus on reshaping its portfolio is evident from its emphasis on making prudent divestitures. To this end, B&G Foods sold the Back to Nature brand in January 2023 — in a bid to exit the small, fragmented-margin snacks portfolio. Management is analyzing other divestiture possibilities to enhance portfolio focus and reduce debt.
Is All Rosy for B&G Foods?
B&G Foods has been struggling with lower volume, hurting its sales performance. The company’s sales dropped 1.9% in the fiscal second quarter to $469.6 million. Base business net sales, which inched up slightly, were largely offset by decreased unit volume and unfavorable currency rates. For fiscal 2023, management anticipates net sales in the band of $2.11-$2.13 billion, down from $2.16 billion reported in the year-ago quarter.
All said, whether the upsides can help B&G Foods keep its growth story alive amid hurdles is yet to be seen.
B&G Foods’ shares have plunged 30.8% year-to-date compared with the industry’s 19.6% decline.
Top 3 Picks
Celsius Holdings CELH, which offers functional drinks and liquid supplements, currently flaunts a Zacks Rank #1 (Strong Buy). CELH delivered an earnings surprise of 100% in the last reported quarter. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Celsius Holdings’ current financial-year sales and earnings suggests growth of 88.9% and 170.3%, respectively, from the year-ago reported numbers.
Flowers Foods FLO emphasizes providing high-quality baked items. The company currently carries a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for Flowers Foods’ current financial year sales suggests growth of 6.7% from the year-ago period’s actuals. FLO has a trailing four-quarter earnings surprise of 7.6% on average.
The Kraft Heinz Company KHC, a food and beverage product company, currently carries a Zacks Rank #2. KHC has a trailing four-quarter earnings surprise of 11.3%, on average.
The Zacks Consensus Estimate for Kraft Heinz’s current fiscal-year sales suggests growth of 2.2% from the corresponding year-ago reported figure.
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