B&G Foods, Inc.BGS saw its shares dip 4.4% during yesterday's after-market trading session, as the company's second-quarter 2018 earnings declined year over year and lagged the Zacks Consensus Estimate. The company, which remains troubled by increased freight expenses, also lowered the upper end of its adjusted EBITDA and bottom-line views for 2018.
Nevertheless, sales grew on the back of solid results from Back to Nature and Green Giant frozen, which have been aiding this Zacks Rank #2 (Buy) stock. Markedly, B&G Foods has seen its shares rally almost 26% in the past three months, easily outpacing the industry 's growth of 6%.
Adjusted earnings came in at 38 cents per share that fell short of the Zacks Consensus Estimate of 42 cents and decreased 7.4% year over year. This could be accountable to increased freight costs that weighed on gross margin along with a rise in interest expenses.
B&G Foods, Inc. Price, Consensus and EPS Surprise
B&G Foods, Inc. Price, Consensus and EPS Surprise | B&G Foods, Inc. Quote
Net sales of $388.4 million came in line with the Zacks Consensus Estimate, and advanced 7.4% year over year. Contribution of nearly $17.6 million from Back to Nature and the strong performance of Green Giant frozen business were the main top-line drivers. In fact, Green Giant frozen marked its fifth consecutive quarter of double-digit sales growth.
Net sales from the company's base business increased 3.1% to $370.2 million, driven by improved net pricing and unit volumes.
Net sales from Green Giant frozen surged 19.7% on the back of innovation products from the business. Further, Pirate Brands' net sales soared 54.6%, mainly fueled by favorable timing of promotional activities along with enhanced distribution. However, Green Giant shelf stable net sales slumped 36.5%.
Adjusted gross margin was 26.1%, which contracted 280 basis points year over year on account of industry-wide high freight cost increases, partially offset by procurement savings, lower warehousing costs and higher net pricing.
SG&A expenses declined 14.5% to $37.3 million, thanks to a fall in acquisition-related costs, lower consumer marketing costs and a decline in non-recurring expenses. As a percentage of sales, SG&A costs went down from 2.4% to 9.6%.
Adjusted EBITDA fell 4.7% to $74.4 million in the reported quarter. Adjusted EBITDA margin came in at 19.2%.
Other Financial Updates
The company concluded the quarter with cash and cash equivalents of $62.8 million, long-term debt of $2,073.9 million and shareholders' equity of $827 million. Net cash from operating activities in the second quarter was $31.1 million.
During the quarter, B&G Foods repurchased shares worth $18.5 million.
Further, the company concluded the buyout of McCann's brand of premium Irish oatmeal from TreeHouse Foods THS at the beginning of the third quarter.
Management revised its guidance for 2018. It now expects net sales in the range of $1.73-$1.75 billion compared to the old projection of $1.72-$1.75 billion. This outlook includes the impact of the new FASB revenue recognition standard that is expected to reduce net sales by $21.5 million.
Adjusted EBITDA is now anticipated to come in the range of $345.0-$355.0 million compared to the old view of $347.5-$365 million. Finally, the company now projects adjusted earnings per share to range between $2.05 and $2.15 compared with $2.05-$2.25 forecasted earlier.
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Pinnacle Foods PF has long-term earnings per share growth rate of 8% and a Zacks Rank #2.
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