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Why Is B&G Foods (BGS) Up 10.1% Since Last Earnings Report?

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It has been about a month since the last earnings report for B&G Foods (BGS). Shares have added about 10.1% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is B&G Foods due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

B&G Foods Q4 Earnings Miss Estimates, Sales Rise Y/Y

B&G Foods reported fourth-quarter fiscal 2020 numbers, with the top and the bottom line missing the Zacks Consensus Estimate. Nevertheless, earnings and sales increased on a year-over-year basis. Results continued to gain on rising demand owing to the pandemic.

The company posted adjusted earnings of 35 cents per share, which missed the Zacks Consensus Estimate of 44 cents. Nonetheless, the bottom line rallied 25% year over year.

Net sales of $510.2 million advanced 8.5% year over year. However, the metric missed the Zacks Consensus Estimate of $525.6 million. The increase in the top line was mainly backed by the Crisco acquisition, favorable net pricing and higher demand stemming from the pandemic. These were somewhat offset by supply chain constraints for some products owing to increased demand amid the pandemic as well as building of inventory by retailers and other customers in the fiscal third quarter. Notably, net sales reflect gains from acquisitions to the tune of $28.1 million, including $27.8 million benefit from the Crisco acquisition (concluded on Dec 1, 2020).

Net sales from the company’s base business increased 2.5% to $482.2 million. The upside can be attributed to favorable net pricing and the impact of product mix of 2.5% of base business net sales. Also, increase in unit volume to the tune of $0.2 million contributed to growth. Further, foreign currency rates had a favorable impact of $0.1 million on the metric.

Net sales of Cream of Wheat, Ortega, Maple Grove Farms, spices & seasonings and Green Giant (including Le Sueur) increased 16.1%, 7.3%, 12.2%, 2.4% and 0.6%, respectively. However, net sales of Victoria declined 4.7%. All said, net sales of all other brands in the aggregate moved up 1.5% year on year.

Adjusted gross profit rose from $97 million to $108.8 million. Further, adjusted gross margin increased to 21.3% from 20.6% reported in the year-ago quarter.

SG&A expenses increased 31.5% to $58.5 million, thanks to rise in consumer marketing costs, acquisition/divestiture-induced and non-recurring expenses, warehousing costs, selling expenses as well as general and administrative expenses. As a percentage of sales, SG&A expenses expanded 2 percentage points to 11.5%.

Adjusted EBITDA increased 5.6% to $73.3 million, driven by the impact of higher net sales. However, adjusted EBITDA margin fell from 14.8% to 14.4% during the quarter. Further, adjusted EBITDA before COVID-19 expenses increased 11.7% to $77.6 million.

Other Financial Updates

The company concluded the quarter with cash and cash equivalents of almost $52.2 million, long-term debt of $2,334.1 million and shareholders’ equity of $831.9 million.

Guidance

For fiscal 2021, management anticipates net sales of around $2.05-$2.10 billion. This includes positive impact from the acquisition of Crisco brand.  Moreover, management expects to keep witnessing solid consumer demand for its products. Due to the uncertainties surrounding the coronavirus outbreak, the company did not provide detailed guidance for fiscal 2021.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions. The consensus estimate has shifted -12.7% due to these changes.

VGM Scores

Currently, B&G Foods has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

B&G Foods has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.


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