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B&G Foods (BGS) Exhibits Strong Prospects Despite Risks

B&G Foods, Inc. BGS remains on track with its transition to four business units. These include spices and flavor solutions, meals, frozen and vegetables and specialty. This business structure is expected to boost the company’s portfolio and performance by helping it sharpen its focus on individual areas.

B&G Foods has been using pricing as the primary tool to help combat inflation. For instance, in the first quarter of fiscal 2023, net pricing and the impact of product mix contributed $63.2 million or 12.2% to base business net sales.

The company’s pricing actions managed to catch up with input cost inflation during the quarter. In the first quarter, its adjusted gross profit came in at $114.9 million, up from $103.4 million reported in the year-ago period. Notably, the adjusted gross profit margin increased 300 basis points (bps) to 22.4%.

The company believes in strengthening its businesses through the addition of assets. In 2020, it acquired the Crisco brand from J.M. Smucker. Prior to this, the company acquired Farmwise (in February 2020) and Clabber Girl (in May 2019).

It has acquired notable brands such as Green Giants, Victoria, Mama Mary, TrueNorth, McCann’s and Ortega. In the first quarter, net sales from brands like spices & seasonings, Clabber Girl and Maple Grove Farms rose 9.6%, 31% and 2.7%, respectively.

However, in the first quarter, B&G Food’s base business net sales declined 1.2% to $511.4 million on account of a decrease in unit volume and the negative impact of foreign currency. Also, net sales in Green Giant (including Le Sueur), Crisco, Ortega and Cream of Wheat businesses recorded declines of 7.3%, 8.4%, 9.7% and 1.7%, respectively.

Further, BGS is exposed to stiff competition from its peers on the grounds of lower fixed costs, pricing, product quality, promotional activities and responsiveness to consumers’ changing requirements. Further, the packaged food industry has lately been subject to intense competition.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

This Zacks Rank #3 (Hold) company’s shares have gained 2.7% in the past three months compared with the industry’s 4.5% growth.

3 Key Picks

Some better-ranked stocks are Conagra Brands, Inc. CAG, Celsius Holdings, Inc. CELH and Nomad Foods Limited NOMD.

Conagra Brands operates as a leading branded food company in North America. CAG currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Conagra Brands’ current financial-year sales and earnings per share suggests growth of 7.1% and 17%, respectively, from the corresponding year-ago reported figures. CAG has a trailing four-quarter earnings surprise of 13.2%, on average.

Celsius Holdings specializes in commercializing healthier, nutritional functional foods, beverages and dietary supplements and currently sports a Zacks Rank #1.

The Zacks Consensus Estimate for Celsius Holdings’ current financial-year sales suggests growth of 67.9%, while earnings per share are expected to rise by 154% from the corresponding year-ago reported figures. CELH has an earnings surprise of 81.8%, in the last reported quarter.

Nomad Foods manufactures and distributes frozen foods. It currently sports a Zacks Rank #1. NOMD has a trailing four-quarter earnings surprise of 8.5%, on average.

The Zacks Consensus Estimate for Nomad Foods’ current financial year sales suggests growth of 8%, while earnings is likely to decline 3.4%, from the prior-year reported numbers.

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Zacks Investment Research