B&G Foods Inc.

by Zacks Equity Research

December 31, 2012 |
BGS

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B&G Foods Inc. (BGS - Snapshot Report) 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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