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B&G Foods (BGS) Slashes Guidance Despite Q3 Earnings Beat

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B&G Foods, Inc. (BGS - Free Report) posted third-quarter 2019 results, wherein both top and bottom lines surpassed the Zacks Consensus Estimate. However, both metrics fell year over year, impacted by Pirate Brands’ divestiture. Further, management lowered its adjusted earnings per share and adjusted EBITDA guidance.

This Zacks Rank #4 (Sell) stock has slumped 46.2% year to date against the industry’s growth of 12.5%.

Q3 Highlights

Adjusted earnings of 54 cents per share beat the Zacks Consensus Estimate of 51 cents. However, the bottom line declined 5.3% year over year. While interest expenses reduced, results were hampered by lower sales and a decline in adjusted EBITDA.

B&G Foods, Inc. Price, Consensus and EPS Surprise

B&G Foods, Inc. Price, Consensus and EPS Surprise

B&G Foods, Inc. price-consensus-eps-surprise-chart | B&G Foods, Inc. Quote

B&G Foods’ net sales of $406.3 million surpassed the Zacks Consensus Estimate of $398 million, though it went down 3.9% year over year. The top line was hurt by the sale of Pirate Brands, which was partly made up by sales from McCann’s (acquired in July 2018) and Clabber Girl (acquired in May 2019). McCann’s and Clabber Girl contributed $0.3 million and $20.1 million, respectively, to B&G Foods’ net sales in the third quarter of 2019.

Net sales from the company’s base business dropped 2.5% to $385.9 million, due to a $14.8-million fall in unit volumes, partly compensated by improved net pricing to the tune of about $5 million. Net sales from Green Giant products (including Le Sueur) fell 4.9%.

Adjusted gross margin was 27.2%, down 80 basis points (bps) year over year. SG&A expenses declined 4.7% to $38.1 million, thanks to lower warehousing, selling and consumer marketing costs, partly negated by a rise in general and administrative expenses along with increased non-recurring costs and costs related to acquisitions/divestitures. As a percentage of sales, SG&A expenses expanded 10 bps to 9.4%.

Adjusted EBITDA fell 6.1% to $86.2 million in the reported quarter on account of Pirate Brands’ divestiture, partially cushioned by improved operating performance and the buyout of Clabber Girl. Adjusted EBITDA margin contracted 50 bps to 21.2%.

Other Financial Updates

The company concluded the quarter with cash and cash equivalents of $267 million, long-term debt of $2,133.5 million and shareholders’ equity of roughly $843.4 million.

During the third quarter, B&G Foods bought back and retired 1,330,865 shares for $24.7 million, and has shares worth $25.3 million remaining for repurchases.

Guidance

The company expects product innovation, prudent acquisitions, efficient pricing and cost of goods sold efforts to help it battle cost inflation in 2019. However, management earlier stated that it expects the sale of Pirate Brands to continue affecting results in the fourth quarter.

All said, management still expects 2019 net sales of $1.665-$1.700 billion.

However, adjusted EBITDA is now anticipated to be $295-$310 million compared with the previous guidance of $305.0-$320.0 million. Further, the company projects adjusted earnings per share of $1.65-$1.80, down from the earlier view of $1.85-$2.00.

Check These Solid Food Stocks

US Foods Holding Corp (USFD - Free Report) , with a Zacks Rank #1 (Strong Buy), has a long-term earnings per share growth rate of 9.3%. You can see the complete list of today’s Zacks #1 Rank stocks here.

J&J Snack Foods (JJSF - Free Report) , with a Zacks Rank #2 (Buy), has an impressive earnings surprise record.

McCormick & Company (MKC - Free Report) , with a Zacks Rank #2, has a long-term earnings per share growth rate of 8%.

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