It has been about a month since the last earnings report for B&G Foods (BGS). Shares have lost about 4.7% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is B&G Foods due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
B&G Foods Cuts View on Q3 Earnings Miss, Soft Consumption Trends
B&G Foods posted third-quarter 2024 results, wherein the top and bottom lines missed the Zacks Consensus Estimate. Both net sales and earnings experienced year-over-year declines.
Sales were impacted by the divestiture of the Green Giant U.S. shelf-stable product line (divested on Nov. 8, 2023), lower unit volumes and consumer purchasing patterns, influenced by high food inflation. However, the Spices and Flavor Solutions business showed positive trends, representing an offset to the overall sales decline. B&G Foods remains committed to reshaping and optimizing its portfolio to enhance focus, improve margins and cash flow, and maximize long-term value creation.
B&G Foods posted adjusted earnings of 13 cents per share, which missed the Zacks Consensus Estimate of 20 cents. Also, the bottom line slumped 52% from 27 cents in the prior-year quarter.
Net sales of $461.1 million declined 8.3% year over year due to the divestiture of the Green Giant U.S. shelf-stable product line, a decline in unit volumes and the negative impact of foreign currency. This was partially offset by higher net pricing and the impacts of product mix. Net sales missed the Zacks Consensus Estimate of $473 million. Base business net sales declined 4.4% to $461.1 million due to lower unit volumes and currency headwinds, partially mitigated by elevated net pricing and an improved product mix.
The adjusted gross profit of $102.4 million decreased from $114.1 million in the year-ago period. The adjusted gross margin contracted 50 basis points (bps) to 22.2%. SG&A expenses declined 4.6% to $46 million due to lower consumer marketing costs, reduced warehousing expenses, lower selling costs and acquisition/divestiture-related and non-recurring expenses, partly offset by elevated general and administrative expenses. As a percentage of net sales, SG&A expenses increased 0.4 percentage points to 10%.
Adjusted EBITDA fell 12.5% to $70.4 million, due to lower base business net sales, the impact of the Green Giant U.S. shelf-stable divestiture and currency on the cost of goods sold for products manufactured at BGS’ Green Giant facility in Mexico. The adjusted EBITDA margin contracted 70 bps to 15.3%.
Decoding B&G Foods’ Segmental Performance
Specialty: Net sales was $161 million, down 9.9% year over year. The decline was due to the lower pricing of Crisco (stemming from decreased commodity costs) as well as lower overall volumes.
Meals: Net sales of $111.6 million dipped 3.9% year over year due to lower volumes, partly made up by elevated net pricing and product mix.
Frozen & Vegetables: Net sales was $89.2 million, down 19.7% year over year. The downtick was due to the divestiture of Green Giant U.S. shelf-stable products and lower volumes.
Spices & Flavor Solutions: Net sales was $99.3 million, up 2.6% year over year due to improved volumes and growth in the fresh fruit perimeter within grocery.
B&G Foods’ Financial Snapshot & Guidance
B&G Foods exited the quarter with cash and cash equivalents of $54.7 million, net long-term debt of nearly $1,814 million and total shareholders’ equity of $755.3 million. In the nine months ended Sept. 28, 2024, net cash provided by operating activities was $50.6 million.
B&G Foods has revised its outlook downward, indicating a slower-than-expected recovery in center store trends and the broader consumer environment. The company anticipates a slow recovery and stabilization in fiscal 2025, with sequential improvement expected between the first and second halves of the year.
For fiscal 2024, management now anticipates net sales in the band of $1.920-$1.950 billion compared with the earlier view of $1.945-$1.970 billion. In fiscal 2023, net sales amounted to $2,062.3 million ($2.06 billion). The company now anticipates adjusted EBITDA in the range of around $295-$305 million compared with $300-$315 million projected earlier. BGS recorded an adjusted EBITDA of $318 million in fiscal 2023. Adjusted earnings per share (EPS) for fiscal 2024 are envisioned to be between 67 cents and 77 cents, lower than the earlier guided range of 70-90 cents. In fiscal 2023, the company posted an adjusted EPS of 99 cents.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
The consensus estimate has shifted 6.21% due to these changes.
VGM Scores
At this time, B&G Foods has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. Notably, B&G Foods has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
B&G Foods is part of the Zacks Food - Miscellaneous industry. Over the past month, Sysco (SYY), a stock from the same industry, has gained 4.4%. The company reported its results for the quarter ended September 2024 more than a month ago.
Sysco reported revenues of $20.48 billion in the last reported quarter, representing a year-over-year change of +4.4%. EPS of $1.09 for the same period compares with $1.07 a year ago.
Sysco is expected to post earnings of $0.93 per share for the current quarter, representing a year-over-year change of +4.5%. Over the last 30 days, the Zacks Consensus Estimate has changed -0.3%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Sysco. Also, the stock has a VGM Score of B.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
