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B&G Foods (BGS) Gains on Pricing & Portfolio Refining Efforts
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B&G Foods, Inc. (BGS - Free Report) has a successful track record of acquisition-led growth. Meanwhile, it undertakes strategic divestitures in an effort to reshape its portfolio. The shelf-stable and frozen food, and household product company is reaping benefits from strategic pricing actions. However, the company is not immune to rising expenses.
Let’s delve deeper.
Portfolio Refining Efforts on Track
B&G Foods is focused on undertaking prudent acquisitions to grow its brand portfolio. It acquired the Crisco brand from J.M. Smucker in December 2020. Before this, the company acquired Farmwise (in February 2020).
It also bought an integrated retail baking powder maker, Clabber Girl (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 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. It is on track to analyze other divestiture possibilities to enhance portfolio focus and reduce debt.
Pricing Actions: Key Driver
B&G Foods is gaining 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, adjusted gross margin expanded 230 basis points 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.
Hurdles in the Way
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, 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%.
Nevertheless, the company’s upsides mentioned above are likely to keep narrating its growth story.
Shares of this Zacks Rank #3 (Hold) company have gained 14% in the past three months compared with the industry’s 11.4% growth.
The Zacks Consensus Estimate for Sysco’s current fiscal-year sales and earnings suggests growth of 4.1% and almost 8%, respectively, from the year-ago figures.
Nomad Foods (NOMD - Free Report) , carrying a Zacks Rank #2, manufactures and distributes frozen foods. NOMD has a trailing four-quarter earnings surprise of 7.7%, on average.
The Zacks Consensus Estimate for Nomad Foods’ current financial year sales indicates growth of 6.6% from the prior-year number. However, earnings estimates forecast a year-over-year decline of 2.3%.
Ingredion Incorporated (INGR - Free Report) , which produces and sells sweeteners, starches, nutrition ingredients and biomaterial solutions, holds a Zacks Rank #2. INGR delivered an earnings surprise of 23.9% in the last reported quarter.
The Zacks Consensus Estimate for Ingredion Incorporated’s current financial-year sales and earnings implies growth of around 5% and 24.7%, respectively, from the year-ago levels.
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B&G Foods (BGS) Gains on Pricing & Portfolio Refining Efforts
B&G Foods, Inc. (BGS - Free Report) has a successful track record of acquisition-led growth. Meanwhile, it undertakes strategic divestitures in an effort to reshape its portfolio. The shelf-stable and frozen food, and household product company is reaping benefits from strategic pricing actions. However, the company is not immune to rising expenses.
Let’s delve deeper.
Portfolio Refining Efforts on Track
B&G Foods is focused on undertaking prudent acquisitions to grow its brand portfolio. It acquired the Crisco brand from J.M. Smucker in December 2020. Before this, the company acquired Farmwise (in February 2020).
It also bought an integrated retail baking powder maker, Clabber Girl (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 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. It is on track to analyze other divestiture possibilities to enhance portfolio focus and reduce debt.
Pricing Actions: Key Driver
B&G Foods is gaining 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, adjusted gross margin expanded 230 basis points 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.
Hurdles in the Way
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, 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%.
Nevertheless, the company’s upsides mentioned above are likely to keep narrating its growth story.
Shares of this Zacks Rank #3 (Hold) company have gained 14% in the past three months compared with the industry’s 11.4% growth.
Better-Ranked Food Bets
Sysco Corporation (SYY - Free Report) , a food and related product company, currently has a Zacks Rank #2 (Buy). SYY delivered an earnings surprise in the last two quarters. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
The Zacks Consensus Estimate for Sysco’s current fiscal-year sales and earnings suggests growth of 4.1% and almost 8%, respectively, from the year-ago figures.
Nomad Foods (NOMD - Free Report) , carrying a Zacks Rank #2, manufactures and distributes frozen foods. NOMD has a trailing four-quarter earnings surprise of 7.7%, on average.
The Zacks Consensus Estimate for Nomad Foods’ current financial year sales indicates growth of 6.6% from the prior-year number. However, earnings estimates forecast a year-over-year decline of 2.3%.
Ingredion Incorporated (INGR - Free Report) , which produces and sells sweeteners, starches, nutrition ingredients and biomaterial solutions, holds a Zacks Rank #2. INGR delivered an earnings surprise of 23.9% in the last reported quarter.
The Zacks Consensus Estimate for Ingredion Incorporated’s current financial-year sales and earnings implies growth of around 5% and 24.7%, respectively, from the year-ago levels.