A month has gone by since the last earnings report for B&G Foods (BGS - Free Report) . Shares have added about 17.2% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is B&G Foods due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
B&G Foods Trims Outlook on Q3 Earnings & Sales Miss
B&G Foods posted third-quarter 2018 results, wherein both top and bottom lines missed the respective Zacks Consensus Estimate. Results were affected by challenging food environment. On the positive side, the company witnessed year-over-year growth in both top and bottom lines.
Adjusted earnings came in at 57 cents per share that fell short of the Zacks Consensus Estimate of 59 cents but increased 3.6% year over year.
Net sales of $422.6 million missed the Zacks Consensus Estimate of $433 million. However, the figure advanced 4.1% year over year. The rise is attributable to the contribution of nearly $19.4 million from Back to Nature and McCann’s sales, $11.3 million from acquisitions and $5.2 million improvement in net pricing and unit volumes growth.
Net sales from the company’s base business decreased 0.3% to $376.5 million, owing to $5.4 million decline in unit volumes, partly negated by 1.2% rise in net pricing.
Net sales from Green Giant frozen surged 14% on the back of innovation products from the business. However, Green Giant shelf stable net sales slumped 12.2%.
Adjusted gross margin was 27.2%, which contracted 260 basis points year over year on account of unfavorable mix, and higher input costs stemming from elevated freight, warehouse and procurement expenses. This was partially offset by increase in net pricing.
SG&A expenses dropped 2.5% to $40 million, thanks to a fall in acquisition-related costs, lower consumer marketing costs and a decline in non-recurring expenses. As a percentage of sales, SG&A expenses went down from 10.1% to 9.5%.
Adjusted EBITDA fell 2.3% to $91.9 million in the reported quarter. Adjusted EBITDA margin came in at 21.7%.
Other Financial Updates
The company concluded the quarter with cash and cash equivalents of $26.2 million, long-term debt of $1,723.1 million and shareholders’ equity of $832.6 million. Net cash from operating activities in the third quarter was $34.3 million.
Further, the company concluded the sale of Pirate Brands to The Hershey Company in the beginning of the fourth quarter. Owing to this sale and repayment of long-term debt, management has revised its 2018 outlook.
Management revised its guidance for 2018. It now expects net sales of $1.71-$1.72 billion, down from the old projection of $1.73-$1.75 billion. This outlook includes the impact of the new FASB revenue recognition standard that is expected to reduce net sales by $21.5 million.
Adjusted EBITDA is now anticipated to be $338.0-$343.0 million compared with the old view of $345-$355 million. Finally, the company projects adjusted earnings per share between $1.98 and $2.05 compared with $2.05-$2.15 forecasted earlier.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -7.83% due to these changes.
Currently, B&G Foods has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, B&G Foods has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.