B&G Foods Inc. - Growth & Income

B&G Foods Inc. ( BGS ) performed well in 2012. The food retailer has surpassed earnings estimates in the first 3 quarters of the year, increased dividend rates regularly and has frequently acquired complimentary brands. In the past 10 quarters, this Zacks #2 Rank has beaten earnings estimates 7 times and matched 3 times. It also pays an impressive dividend yield of 4.1%, which makes it ideal for income investors.

Solid Third Quarter

On October 18, B&G Foods reported third-quarter adjusted earnings of 35 cents per share, surpassing the Zacks Consensus Estimate by 9.4% and trouncing last year's performance by 40.0%.

Total sales grew 15.9% year over year to $154.2 million, driven by the addition of the Culver Specialty brands and improving trends in the base business. The base business gained from strong pricing and a product mix shift toward the higher margin Culver Specialty brands, which offset the headwinds from volume.

Gross margins expanded 470 basis points to 35.9%, driven by pricing gains and a favorable sales mix.

After acquiring the Culver Specialty brands last year from Unilever, B&G Foods acquired two complementary snack brands from Chipita America, Inc. this past October for $62.5 million: New York Style and Old London.

For 2012, the company now expects EBITDA to reach the higher end of its previously provided guidance of $168 million to $170 million, reflecting a year-over-year increase of 29% at the mid point. Subsequently, the company is optimistic about achieving positive volume growth in the fourth quarter of 2012.

Attractive Dividend

In addition to registering robust earnings growth, B&G Foods pays a regular quarterly dividend of 29 cents per share, representing an annual dividend yield of 4.1%. The company has raised the payout four times since early 2011, including a 7.4% increase in October and a 17.1% increase in February this year.

Earnings Estimates Going Up

Over the last 60 days, the Zacks Consensus Estimate for 2012 has gone up 1.4% to $1.41 per share, reflecting a year-over-year increase of 29.1%. The Zacks Consensus Estimate for 2013 has advanced 2% to $1.50 per share over the same time frame, reflecting a year-over-year increase of 6.8%.

Reasonable Valuation

B&G Foods currently trades at a forward price-to-equity (P/E) of 21.11x, reflecting a very small premium of 2.9% to the peer group average of 20.52x. The stock is trading at a premium to the peer group average on a price-to-sales and price-to-book basis as well. However, on a return on equity (ROE) basis, the stock has a trailing 12-month ROE of 26.8%, which is above its peer group average of 17.3%.

Chart Echoing Strength

Shares of B&G Foods have witnessed a positive trend since May 21, 2012. The stock reached its 52-week high of $32.84 on September 21. Moreover, it is currently above its 200-day moving average, which stands at $26.29 per share. It has been consistently trading above its 200-day moving average since early October 2011.

Volume is at roughly 322K daily. B&G Foods has mostly outperformed the S&P 500 over the past six months. The year-to-date return for the stock is 16.28% compared with the S&P 500's return of 12.75%.

B&G Foods is a leading food company that sells products across the United States, Canada and Puerto Rico. Foods are sold under popular brands like Ac'cent, B&G, B&M, Baker's Joy, Brer Rabbit, Cream of Rice and many more. The company has a market cap of $1.50 billion.

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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.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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