B&G Foods, Inc. (BGS Quick QuoteBGS - Free Report) is benefiting from continued demand for its products, as consumers are cooking and baking at home amid the pandemic. Management expects to keep witnessing solid consumer demand for its products compared with pre-pandemic levels. In third-quarter fiscal 2021, B&G Foods’ net sales increased 26.7% compared with third-quarter 2019 tally.

Apart from this, B&G Foods’ focus on strategic acquisitions and growing e-commerce business bode well. However, escalated input cost inflation is a headwind. Let’s discuss further.

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What’s Working for B&G Foods?

The Zacks Rank #3 (Hold) company is benefiting from higher online sales, thanks to social-distancing trends. E-commerce sales are accelerating with pace, mainly attributable to efficient delivery services. The company expects to continue seeing solid online trends and is making investments to strengthen its online presence.

B&G Foods has a successful track record of acquisition-led growth as it has integrated over 50 brands into the company’s portfolio since its establishment in 1996. The company is actively pursuing strategic acquisitions to boost growth. B&G Foods acquired the Crisco brand from J.M. Smucker in December 2020. The company’s net sales in third-quarter fiscal 2021 reflect gains worth $71.2 million from the Crisco acquisition. Prior to this, the company acquired Farmwise (in February 2020), while it also acquired an integrated retail baking powder maker Clabber Girl (acquired in May 2019).

Several other companies in the food space like Post Holdings, Inc. (POST Quick QuotePOST - Free Report) , Hormel Foods Corporation (HRL Quick QuoteHRL - Free Report) and McCormick & Company, Incorporated (MKC Quick QuoteMKC - Free Report) are benefiting from acquisitions.

In fourth-quarter fiscal 2021, Post Holdings’ top line included $99.8 million in net sales from the acquisitions made in fiscal 2021. The buyouts include Private label ready-to-eat cereal business Egg Beaters liquid egg brand, Almark Foods business and related assets and Peter Pan nut butter brand.

Hormel Foods is strengthening its business through strategic acquisitions. In June, HRL acquired the Planters snacking portfolio from The Kraft Heinz Company. Prior to this, the company acquired Texas-based pit-smoked meats company Sadler's Smokehouse in March 2020. The buyout is in sync with Hormel Foods’ initiatives to strengthen its position in the foodservice space.

McCormick has strategically increased its presence through acquisitions, which have been strengthening its portfolio. In December 2020, McCormick bought a 100% stake in FONA International, LLC and some of its affiliates. FONA’s diverse portfolio helps McCormick bolster its value-add offerings and expand the flavor solutions segment into attractive categories. In November 2020, McCormick acquired the parent company of Cholula Hot Sauce — a premium Mexico-based hot sauce brand. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Roadblocks for B&G Foods

During third-quarter fiscal 2021, B&G Foods’ gross profit fell from $136 million to $105.7 million, thanks to higher-than-anticipated input cost inflation. This includes escalated raw materials and transportation expenses. In fact, management expects input cost inflation to be significantly higher year over year in the fourth quarter.

Nonetheless, the company is on track to mitigate the impact of inflation by undertaking cost-saving initiatives, increasing list prices as well as locking in prices via short-term supply contracts and advance commodities purchase agreements. That being said, B&G Foods does not expect to fully offset the additional cost headwinds.

Shares of B&G Foods have increased 2.6% in the past year against the industry’s decline of 0.3%. POST and MKC have gained 4.9% and 1.4%, respectively, in the past year. HRL has inched down 0.1% during this time.