Will Buyouts Drive B&G Foods' (BGS) Q3 Earnings Performance?

B&G Foods Inc. BGS is set to report third-quarter 2017 results on Oct 31, after market close. The company posted a negative earnings surprise in the last quarter and has missed the Zacks Consensus Estimate by average of 8.12% in the trailing four quarters.

Let’s see how things shape up prior to this announcement.

In the third quarter of 2017, the company had plans to extend the line of Green Giant frozen innovation products launched in 2016 with five new entries. This is expected to boost demand, thereby driving revenues in the to-be-reported quarter. The Zacks Consensus Estimate for revenues is pegged at $1.10 billion, implying 8.7% growth. Notably, net sales of Green Giant frozen products grew $9.4 million or 14% in the second quarter, driven by the brand's innovative products.

We are also encouraged by the company’s aggressive acquisition strategy. B&G Foods acquired snack foods manufacturer, Back to Nature Foods Company. The deal is expected to contribute to cash earnings per share (EPS) and free cash flow.

Meanwhile, the company’s earlier buyouts, Victoria Fine Foods Holding Company and Victoria Fine Foods, LLC in December 2016 and spices and seasonings business of ACH Food Companies, Inc in November 2016, are also likely to contribute to third-quarter results.

B&G Foods expects cost savings from Mama Mary's plant consolidation, procurement savings and packaging changes of few Green Giant products to drive incremental adjusted EBITDA of approximately $7 million in the third and fourth quarter of 2017.

However, the company expects incremental frozen, warehouse and distribution costs of approximately $4 million to impact third-quarter results.

Also, the company’s weak base business raises concerns. The company's base sales declined 2.4% in the first quarter and 4.9% in the second quarter of 2017 owing to declining unit volumes.

Again, the North American food industry has been witnessing sluggish growth and slowdown in consumption over the last few quarters due to a shift in consumer preference toward healthier options. This has been hurting results of major food companies like General Mills, Inc. GIS, Mondelez International Inc. MDLZ and Kellogg Company K. For the third quarter, the Zacks Consensus Estimate for earnings stands at 48 cents, reflecting a 14.3% year-over-year decline.

Here is what our quantitative model predicts:

B&G Foods has the right combination of two main ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — which increase the odds of an earnings beat.

Zacks ESP: The Earnings ESP for B&G Foods is +4.17%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.  

Zacks Rank: B&G Foods carries a Zacks Rank #2 (Buy), which increases the predictive power of ESP.

Wall Street’s Next Amazon

Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.

Click for details >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
General Mills, Inc. (GIS) : Free Stock Analysis Report
 
B&G Foods, Inc. (BGS) : Free Stock Analysis Report
 
Kellogg Company (K) : Free Stock Analysis Report
 
Mondelez International, Inc. (MDLZ) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research