A company that grows through acquisitions can step up growth
This has been the strategy atB&G Foods (
). It's an approach that works especially well in an environment
of low interest rates.
Just recently CEO David Wenner pointed out that the company
issued $700 million of senior notes at 4.625%, which allowed
B&G to retire its 7.625% senior notes.
Interest rates are rising, though, and many market watchers
see that as a trend. Will that affect B&G?
At the July 18 earnings call, Wenner said: "You have to be a
little more cautious here as interest rates start inching
A second factor works in B&G's favor on the acquisition
front. B&G is small enough that acquiring a niche player can
help B&G's top and bottom lines.
The big players in the packaged food group -- companies like
) andGeneral Mills (
) -- generally don't compete for the small targets. In fact,
sometimes the businesses B&G acquires are orphan brands
within the big companies.
Competition typically comes from private equity firms.
At a Boston conference in 2012, Wenner said, "We are very,
very good at executing on acquisitions." It's not bragging if you
can do it. B&G typically likes to grab companies or brands in
a sales decline and then turn them around "to generate modest
B&G's brands include Cream of Wheat, Ortega and Static
Earnings increased 48%, 21% and 24% on revenue gains of 2%, 6%
and 17% in the past three years. The Street expects 13% EPS
growth on sales growth of 14% this year.
The quarterly dividend has nearly doubled since 2010. The
annualized yield is 3.7%.
The stock has formed a flat base with a 36.59 buy point.