It's not easy to grab Wall Street's attention when you earn a
living selling vinegar, tomato sauce, fruit spreads and other
These aren't the kinds of products that quicken the heartbeat
of investors looking to ride a stock into early retirement.
But they are the kinds of products people need. And they can
produce solid profits and steady revenue growth if you sell the
right goods into the right market.
B&G Foods (
) is a case in point. The manufacturer of shelf-stable foods such
as Cream of Wheat, Ortega salsa and Grandma's Molasses has
averaged 28% earnings growth and 4% sales growth over the past
Through the first two quarters of 2012, it has grown profit at
least 27% and sales at least 15%. It pays a quarterly dividend of
27 cents a share.
These numbers won't blow anybody's doors off. But they do
bring comfort to investors who want a little stability when
joblessness is high, Europe is choking on debt, the global
economy is uncertain and the markets are wobbly.
Judging from B&G's recent stock performance, there are
plenty of those kinds of investors around. The company's shares
have set new highs nearly every week for three months. The stock
hit an all-time high of 29.47 on Tuesday. It has risen more than
20% since the beginning of the year.
The name B&G might not ring a bell with many consumers,
but the company's products will. In addition to the Cream of
Wheat and Ortega brands, its lineup includes Mrs. Dash
seasonings, Regina vinegars, Underwood Deviled Ham, Don Pepino
pizza sauce, Emeril's Organic Cooking Stocks and Vermont Maid
B&G also makes Crock-Pot Seasoning Mixes through a
partnership with Jarden Consumer Solutions, maker of the
Crock-Pot. The mixes were introduced in April, the same month
B&G and Jarden announced their partnership.
"We believe this relationship has potential over time to
expand into Jarden's other consumer products," Gary Albanese, an
analyst at Auriga USA, noted in a report earlier this year.
But most of the recent attention has been on B&G's ongoing
integration of Culver Specialty Brands, which it bought less than
a year ago from Unilever. That $325 million deal brought aboard
the Mrs. Dash, Baker's Joy and Molly McButter brands.
The current focus is on expanding the customer base for Culver
products, watchers say.
"While distribution gains for the Culver business have yet to
materialize in a meaningful way, management is confident in the
prospects for near-term distribution gains in that business," RBC
Capital Markets analyst Edward Aaron noted in a report following
B&G's second-quarter earnings release.
The Culver product suite has been a major contributor to
B&G's revenue growth this year. The strength of those
products, combined with price increases instituted late last
year, helped offset a decline in sales volume for other products
during the second quarter.
B&G Chief Executive David Wenner addressed that decline
during a Q2 conference call, saying that the volume loss "shows
that we have not been totally immune to the general weakness in
the food business, though our percent decline is meaningfully
lower than many of our competitors.
"We have no good answers to the two key questions: Where are
the consumers, and what are they eating?" Wenner continued. "But
we most certainly see that price increases have influenced their
B&G's price increases were implemented to help cover
higher costs, especially for goods such as sweeteners and
But the company has locked in favorable prices on certain
"The company is hedged well into next year on both wheat and
corn at 'pre-spike' levels," analyst Aaron noted. "While we do
not pretend to know the future direction of grain prices, this
has positive implications for 2013 at this point, given that
wheat is up 58% and corn is up 47% from recent lows in late
Although B&G's higher prices have caused some customers to
cut back on orders, analysts expect the strategy to pay dividends
over the long haul.
"We are confident (B&G) will experience solid EBITDA
growth amidst a manageable cost/pricing environment in coming
quarters," noted Alton Stump, analyst at Longbow Research. "In
that vein, the company's recent late 2011 price increase should
help mitigate cost pressures over the next couple of
B&G reported EBITDA of $39.6 million during the second
quarter, which was slightly below consensus estimates. But
earnings per share, which grew 27% to 33 cents, beat Wall Street
views by 2 cents.
Revenue grew 15% to $148.6 million, in line with most
B&G management said the company secured increased
distribution for several brands, including Ortega and Cream of
Wheat, during the second quarter. This should lead to flat
volumes this quarter and positive volumes during the fourth
quarter, analysts say.
Analysts polled by Thomson Reuters expect B&G to grow
annual earnings 28% this year and 6% in 2013.