B&G Foods, Inc. BGS is on track with refining its portfolio to drive long-term growth. The shelf-stable and frozen food and household product company is on track with strategic pricing actions to counter inflationary headwinds.
Let’s delve deeper.
What’s Working Well for B&G Foods?
The Zacks Rank #3 (Hold) company has a successful track record of acquisition-led growth. On May 5, 2023, the company acquired the frozen vegetable manufacturing operations of Growers Express, LLC., which works well for its Green Giant brand operations.
Management acquired the Crisco brand in December 2020. Before this, the company acquired Farmwise (in February 2020), while BGS also bought an integrated retail baking powder maker, Clabber Girl (in May 2019). B&G Foods has also acquired notable brands such as Green Giants, Victoria, Mama Mary, TrueNorth, McCann’s and Ortega.
The company’s focus on reshaping its portfolio is also evident from its focus on making prudent divestitures. To this end, B&G Foods sold the Back to Nature brand in January 2023 — in a bid to exit the small, fragmented lower, margin snacks portfolio. Management is analyzing other divestiture possibilities to enhance portfolio focus and reduce debt.
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Efficient pricing has been protecting B&G Foods’ margins. The company’s pricing actions caught up with the higher costs and inflation during the second quarter of fiscal 2023. The quarterly gross margin expanded to 21.8% from 16% reported in the year-ago quarter. Its adjusted EBITDA, as a percentage of net sales, stood at 14.6%, up from 11.3% reported in the year-ago quarter. The company continues to see inflation across most of its portfolio, although the pace of inflation has slowed.
Lower Volumes Hurt
B&G Foods has been struggling with lower volume, hurting its sales performance. In the fiscal second quarter, the company’s sales dropped 1.9% to $469.6 million. Base business net sales, which inched up slightly, were largely offset by decreased unit volume and unfavorable currency rates.
At the time of its last quarterly results, management lowered its net sales outlook for fiscal 2023. The company now anticipates net sales in the band of $2.11-$2.13 billion compared with the previous guidance of $2.13-$2.17 billion. In fiscal 2022, net sales amounted to $2.16 billion.
All said, we expect B&G Foods’ growth endeavors to offer some respite.
The company’s shares have plunged 24.8% in the past three months compared with the industry’s 7.7% decline.
Appetizing Food Picks
MGP Ingredients MGPI, which produces and markets ingredients and distillery products, currently sports a Zacks Rank #1 (Strong Buy). MGPI has a trailing four-quarter earnings surprise of 18% on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for MGP Ingredients’ current financial-year sales and earnings per share suggests growth of 5.8% and 10.4%, respectively, from the corresponding year-ago reported figures.
Flowers Foods FLO emphasizes providing high-quality baked items. The company currently carries a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for Flowers Foods’ current financial-year sales suggests growth of 6.7% from the year-ago period’s actuals. FLO has a trailing four-quarter earnings surprise of 7.6% on average.
Celsius Holdings CELH, which offers functional drinks and liquid supplements, currently carries a Zacks Rank #2. CELH delivered an earnings surprise of 100% in the last reported quarter.
The Zacks Consensus Estimate for Celsius Holdings’ current financial-year sales and earnings suggests growth of 88.9% and 170.7%, respectively, from the year-ago reported numbers.
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