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B&G Foods' (BGS) Strategies Position it Well for Growth in 2024
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B&G Foods, Inc. (BGS - Free Report) continues to reap benefits from strategic pricing efforts. The shelf-stable and frozen food and household product company’s efforts to reshape its portfolio are evident from its focus on making prudent acquisitions and strategic divestitures.
Let’s delve deeper.
Pricing Actions Protect Margins
B&G Foods is reaping benefits from continued margin recovery on the back of pricing actions undertaken to counter inflationary costs through pricing and productivity efforts. In the third quarter of fiscal 2023, the company’s adjusted gross margin expanded 230 basis points (bps) to 22.7%. The gross margin expansion was backed by increased net pricing (relative to input costs), reduced transportation and warehousing costs and moderation of input cost inflation.
Efforts to Refine Portfolio
B&G Foods has a successful track record of acquisition-led growth. B&G Foods acquired the Crisco brand from J.M. Smucker in December 2020. Before this, the company acquired Farmwise (in February 2020). It also acquired an integrated retail baking powder maker, Clabber Girl (acquired in May 2019). In its last earnings call, management highlighted that Clabber Girl continued its strong performance, with brand sales rising 31.5% year over year in the third quarter of 2023.
The company’s focus on reshaping its portfolio is also evident from its emphasis on making prudent divestitures. To this end, management sold its Green Giant U.S. shelf-stable product line to Seneca Foods Corporation in November 2023. BGS plans to utilize the net proceeds from this sale to repay long-term debt. Management sold the Back to Nature brand in January 2023 — to exit the small, fragmented lower and margin snacks portfolio. The company is on track to analyze other divestiture possibilities to enhance portfolio focus and reduce debt.
Image Source: Zacks Investment Research
High SG&A Costs Stay
B&G Foods has been grappling with higher selling, general and administrative (SG&A) expenses for a while. In the third quarter of fiscal 2023, B&G Foods’ SG&A expenses escalated 1.4% to $48.2 million due to higher general and administrative expenses and consumer marketing costs. As a percentage of net sales, SG&A expenses escalated 0.6 percentage points to 9.6%.
B&G Foods’ focus on strategic pricing actions and other upsides mentioned above are likely to drive the upside.
The Zacks Rank #3 (Hold) company’s shares have gained 10.8% in the past three months compared with the industry’s 8.1% growth.
The Zacks Consensus Estimate for MGP Ingredients’ current financial year sales and earnings suggests growth of almost 6% and 14.2%, respectively, from the year-ago reported figures. MGPI has a trailing four-quarter earnings surprise of 16.2% on average.
Vital Farms Inc. (VITL - Free Report) offers a range of produced pasture-raised foods. It currently carries a Zacks Rank #2. VITL has a trailing four-quarter earnings surprise of 145% on average.
The Zacks Consensus Estimate for Vital Farms’ current financial year sales suggests growth of 29.4% from the year-ago reported figure.
Sysco Corporation (SYY - Free Report) , a food and related product company, currently has a Zacks Rank #2. SYY delivered a positive earnings surprise in the last two quarters.
The Zacks Consensus Estimate for Sysco’s current fiscal-year sales and earnings suggests growth of 4.1% and almost 8%, respectively, from the corresponding year-ago reported figure.
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B&G Foods' (BGS) Strategies Position it Well for Growth in 2024
B&G Foods, Inc. (BGS - Free Report) continues to reap benefits from strategic pricing efforts. The shelf-stable and frozen food and household product company’s efforts to reshape its portfolio are evident from its focus on making prudent acquisitions and strategic divestitures.
Let’s delve deeper.
Pricing Actions Protect Margins
B&G Foods is reaping benefits from continued margin recovery on the back of pricing actions undertaken to counter inflationary costs through pricing and productivity efforts. In the third quarter of fiscal 2023, the company’s adjusted gross margin expanded 230 basis points (bps) to 22.7%. The gross margin expansion was backed by increased net pricing (relative to input costs), reduced transportation and warehousing costs and moderation of input cost inflation.
Efforts to Refine Portfolio
B&G Foods has a successful track record of acquisition-led growth. B&G Foods acquired the Crisco brand from J.M. Smucker in December 2020. Before this, the company acquired Farmwise (in February 2020). It also acquired an integrated retail baking powder maker, Clabber Girl (acquired in May 2019). In its last earnings call, management highlighted that Clabber Girl continued its strong performance, with brand sales rising 31.5% year over year in the third quarter of 2023.
The company’s focus on reshaping its portfolio is also evident from its emphasis on making prudent divestitures. To this end, management sold its Green Giant U.S. shelf-stable product line to Seneca Foods Corporation in November 2023. BGS plans to utilize the net proceeds from this sale to repay long-term debt. Management sold the Back to Nature brand in January 2023 — to exit the small, fragmented lower and margin snacks portfolio. The company is on track to analyze other divestiture possibilities to enhance portfolio focus and reduce debt.
Image Source: Zacks Investment Research
High SG&A Costs Stay
B&G Foods has been grappling with higher selling, general and administrative (SG&A) expenses for a while. In the third quarter of fiscal 2023, B&G Foods’ SG&A expenses escalated 1.4% to $48.2 million due to higher general and administrative expenses and consumer marketing costs. As a percentage of net sales, SG&A expenses escalated 0.6 percentage points to 9.6%.
B&G Foods’ focus on strategic pricing actions and other upsides mentioned above are likely to drive the upside.
The Zacks Rank #3 (Hold) company’s shares have gained 10.8% in the past three months compared with the industry’s 8.1% growth.
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MGP Ingredients, Inc. (MGPI - Free Report) produces and markets ingredients and distillery products to the packaged goods industry. The company currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for MGP Ingredients’ current financial year sales and earnings suggests growth of almost 6% and 14.2%, respectively, from the year-ago reported figures. MGPI has a trailing four-quarter earnings surprise of 16.2% on average.
Vital Farms Inc. (VITL - Free Report) offers a range of produced pasture-raised foods. It currently carries a Zacks Rank #2. VITL has a trailing four-quarter earnings surprise of 145% on average.
The Zacks Consensus Estimate for Vital Farms’ current financial year sales suggests growth of 29.4% from the year-ago reported figure.
Sysco Corporation (SYY - Free Report) , a food and related product company, currently has a Zacks Rank #2. SYY delivered a positive earnings surprise in the last two quarters.
The Zacks Consensus Estimate for Sysco’s current fiscal-year sales and earnings suggests growth of 4.1% and almost 8%, respectively, from the corresponding year-ago reported figure.