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

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B&G Foods, Inc. (BGS - Free Report) is in the right industry at the right time in 2020 as Americans stock up on frozen foods during the coronavirus crisis. This Zacks Rank #1 (Strong Buy) is expected to grow earnings by 21% this year.

B&G Foods makes and sells branded shelf-stable and frozen foods in the United States, Canada and Puerto Rico. It has more than 50 popular brands in its portfolio including Back to Nature, Cream of Wheat, Dash, Green Giant, Las Palmas, Mama Mary's, Ortega, Spice Islands and Victoria.

Green Giant is Hot Again

On May 5, B&G Foods reported first quarter results and beat the Zacks Consensus by $0.03. Earnings were $0.46 versus the consensus of $0.43.

It was the fourth quarter in a row the company met or beat the Zacks Consensus Estimate.

Net sales rose 8.9% to $449.4 million as base business net sales increased 4.3% to $430.5 million.

Net sales of Green Giant, including Le Sueur, rose 16.3% in the quarter year-over-year. Cream of Wheat sales rose 8.7%, Ortega was up 4.1% and Maple Grove Farms rose 3%.

I don't know about you, but I bought frozen Green Giant vegetables in March during the coronavirus panic buying. Apparently, I was not alone.

The company said that increases in sales to supermarkets, mass merchants, warehouse clubs, wholesalers and e-commerce customers more than offset the declines at food service customers in the quarter.

In 2019, food service customers were just 13% of the company's overall sales.

But What Happens Now?

B&G Foods saw the higher sales trend continue in April, with net sales in April 2020 increasing more than $70 million, or more than 60%, compared to net sales in April 2019.

But most states still had lock downs on in April.

Will the US consumer continue to buy Green Giant and other "eat at home" foods and products in May and June?

No 2020 Guidance But Analysts Still Raised Estimates

Even though the trends have been good, B&G Foods did not provide any guidance for the remainder of 2020. There are too many unknowns about the impacts of COVID-19 on business.

Each state is reopening at different times, which means different demands for food. Additionally, what will a second, or even third, wave do for demand?

The company is taking all safety precautions with its own manufacturing and has been paying employees $2.00 an hour extra pay starting in March through at least May 22.

But there is no guarantee there won't be production shutdowns in its own business going forward.

Still, analysts are bullish and have been raising 2020 earnings estimates.

The Zacks Consensus for 2020 has jumped to $1.99 from $1.67 in the last 30 days.

That's earnings growth of 21.3% as the company only made $1.64 last year.

Cash Flow is Solid

Even though the company had an outstanding first quarter, it still tapped its revolver and drew down $100 million in mid-March. It has a $700 million revolving credit facility.

At the end of the first quarter it had cash and cash equivalents of $127.1 million.

It's Paying It's Big Dividend

On May 13, B&G Foods announced the payment of its quarterly dividend of $0.475 per share.

It's payable to shareholders of record as of June 30, on July 30, 2020.

This is its 63rd consecutive quarterly dividend.

With the shares still down 24% year-to-date, it's currently yielding an incredible 8.6%.

Other food company competitors, such as Campbell Soup Company (CPB - Free Report) , paid a dividend earlier this year as well, but Campbell's currently yields only 3%.

Shares Soar Off the Lows, But Are They Still a Deal?

B&G Foods shares have been on a steady 5-year decline until shoppers ran into a panic to their supermarkets to buy food in mid-March during the coronavirus shutdowns.

Shares were up 30% in the last month but have fallen from their highs, making the stock more attractive.



They now trade with a forward P/E of just 11.1.

For investors looking for a company that is benefiting from the coronavirus crisis, B&G Foods is one to put on your short list.

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