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Bear of the Day: B&G Foods (BGS)

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B&G Foods, Inc. (BGS - Free Report) is facing inflationary pressures even as demand for their food products remains elevated. This Zacks Rank #5 (Strong Sell) is now expected to see declining earnings in 2022.

B&G Foods makes, sells and distributes branded shelf-stable and frozen foods across the United States, Canada and Puerto Rico. It has a diverse portfolio of more than 50 brands including Cream of Wheat, Crisco, Dash, Green Giant, Ortega, Spice Islands, Back to Nature and Bear Creek.

Another Miss in Q1 of 2022

On May 5, B&G Foods reported its first quarter 2022 results and missed on the Zacks Consensus Estimate by $0.05. It reported $0.34 versus the consensus of $0.39.

It was the 6th consecutive earnings miss.

Net sales rose 5.4% to $532.4 million versus the first quarter in 2021 however the increase was primarily due to pricing initiatives and the impact of product mix, partially offset by volume declines primarily due to price elasticity and supply chain challenges in the quarter resulting from the COVID-19 Omicron variant.

Gross profit fell year-over-year to 19% of net sales from 23.3% of net sales in 2021 due to higher than expected input cost inflation, including higher costs for raw materials and transportation.

Inflation and higher costs were mentioned numerous times throughout B&G Foods' press release for the quarter.

Analysts Cut Full Year Estimates

B&G Foods was a pandemic winner as consumers started cooking at home during the original 2020 pandemic lock down and rediscovered the art of cooking. They have continued to cook at home even on the reopening.

B&G Foods expects strong consumer demand to continue. But cost inflation is everywhere.

From the May 5, 2022 press release:

"The Company has also seen, and expects to continue to see, significant cost inflation for various inputs, including ingredients, packaging, transportation and labor attributable to a number of factors, including the COVID-19 pandemic, the war in Ukraine, climate and weather conditions, supply chain disruptions (including raw material shortages) and labor shortages."

B&G Foods is raising prices to address the inflationary pressures but even with that, the analysts are still bearish. 2 estimates have been lowered in the last week.

The Zacks Consensus Estimate has fallen to $1.66 from $2.01 just 90 days ago. That's an earnings decline of 11.7% as the company made $1.88 last year.

Shares Sink in 2022

B&G Foods shares soared during the first year of the pandemic but in 2021, they mostly treaded water. However, like a lot of stocks in 2022, the shares have sunk.

They are down 22% year-to-date and now trade with a forward P/E of 14.

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However, investors are rewarded by the company's dividend which is now yielding 7.6%. In May 2022, it paid its 70th consecutive quarterly dividend. It has paid a dividend every quarter since its Oct 2004 IPO.

Many income investors like B&G for its consistent dividend history. It did not cut the dividend during the pandemic.

However, value investors might want to wait on the sidelines for it to get cheaper and for the inflationary pressures to recede.

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