B&G Foods Post Mixed Q1 Numbers; Acquires Growers Express

Branded shelf-stable and frozen foods provider B&G Foods, Inc. (BGS) delivered a mixed set of first-quarter numbers. Additionally, the company has also acquired the frozen vegetable manufacturing operations of Growers Express.

For Q1, BGS’ revenue increased by 5.4% to $532.4 million, outperforming analysts’ expectations of $512.89 million. Earnings per share at $0.34, on the other hand, lagged estimates by $0.06. The increase in the top line came on the back of pricing initiatives and a favorable product mix.

Gross margins declined to 19% from 23% a year ago due to input cost inflation, and this impact is expected to continue for the remainder of fiscal 2022. BGS is endeavoring to mitigate this impact via short-term supply contracts as well as advance commodities purchase agreements.

Management Weighs In

The President and CEO of BGS, Casey Keller, commented, “First quarter results delivered strong sales growth behind pricing and elevated demand. However, inflation on key input costs was higher than expected primarily resulting from the war in Ukraine and continued supply disruptions and had a significant impact on gross margins. Recent pricing actions are expected to recover higher costs in the second half of 2022.”

2022 Outlook

The company is witnessing strong consumer demand and has raised its full-year fiscal 2022 guidance. Revenue is expected to land in the range of $2.1 billion to $2.14 billion, while adjusted diluted earnings per share are expected to be in the range of $1.65 to $1.75.

Growers Express

Additionally, BGS announced the acquisition of the frozen vegetable manufacturing operations of Growers Express LLC. The move is expected to lower supply chain risk, as well as costs for certain Green Giant frozen products.

Growers Express provides frozen vegetable products, which mainly consist of green giant riced veggies and green giant veggie spirals.

While transaction terms remain undisclosed, BGS expects a slight reduction in its consolidated leverage ratio as a result of the acquisition.

Retail Investors Remain Positive

At the time of writing, TipRanks data indicates that investor sentiment remains very positive about BGS, with the number of portfolios holding BGS up by 11.6% in the last 30 days.

Analyst’s Take

Jefferies analyst Robert Dickerson has reiterated a Hold rating on the stock alongside a price target of $25.  

Overall, the Street has a Hold rating on BGS based on four Holds and a Sell. At the time of writing, the average B&G Foods price target was $27.80, which implies the stock is fairly priced at current levels.

Closing Note

The company is facing cost challenges due to factors such as the COVID-19 pandemic, conflict in Ukraine, climate change, supply chain bottlenecks, and labor shortages.

While BGS is taking steps in the form of list price increases, trade spending initiatives, and cost-saving actions to face these challenges, the ultimate result remains uncertain.

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