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B&G Foods (BGS) Down 15% in 3 Months: High Costs a Key Reason
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B&G Foods, Inc. (BGS - Free Report) appears to be in not-so-great shape, with its shares down 15.3% in the past three months compared with the industry’s decline of 8.7%. The company has been encountering severe cost headwinds, which, along with supply-chain disruptions, led management to lower its adjusted EBITDA and earnings per share (EPS) view for fiscal 2022 when it reported first-quarter results.
The company expects adjusted EBITDA for fiscal 2022 in the range of $348-$358 million compared with the $358-$368 million range forecast earlier and the $358 million recorded in fiscal 2021. The adjusted EPS in fiscal 2022 is envisioned to be nearly in the band of $1.65-$1.75 now, down from the $1.70-$1.85 band projected before. In fiscal 2021, the metric came in at $1.88.
Let’s take a closer look at the downsides of this Zacks Rank #4 (Sell) company.
Image Source: Zacks Investment Research
Things Not So Rosy for B&G Foods
B&G Foods has been battling cost inflation like many other industry players. In the first quarter of 2022, the company’s adjusted gross profit came in at $101.3 million compared with $117.8 million in the year-ago period. The adjusted gross margin of 19% contracted 430 basis points (bps). The gross margin was hurt by greater-than-anticipated input cost inflation. This includes escalated raw materials (like oil, wheat, corn, fuel and other commodities) and transportation expenses.
Adjusted EBITDA decreased by 16.2% to $77.9 million due to the same factors impacting the adjusted EPS. The adjusted EBITDA margin contracted 380 bps to 14.6%. On its first-quarter earnings call, management stated that it anticipates similar levels of margin compression during the second quarter.
BGS expects the input cost inflation to have a considerably industry-wide effect in the remainder of fiscal 2022. Management expects cost of goods sold inflation in 2022 to be 19-20%. It expects to keep seeing significant cost inflation for inputs, such as ingredients, packaging and transportation, due to factors like the pandemic, the Ukraine war, weather conditions, supply-chain hurdles and the shortage of labor.
On its first-quarter 2022 call, management stated that apart from cost inflation, other pandemic-related factors, such as the duration of social distancing and stay-at-home trends, other waves or variants of the pandemic, the operation of manufacturing facilities, the company’s ability to procure ingredients and other raw materials and supply-chain status, among others, may impact the company’s performance.
Wrapping Up
B&G Foods is on track to mitigate the impact of inflation by undertaking cost-saving initiatives, increasing list prices and locking in prices via short-term supply contracts and advance commodities purchase agreements. That said, these may not fully offset additional cost headwinds in the remaining part of fiscal 2022.
The Chef's Warehouse, which engages in the distribution of specialty food products, sports a Zacks Rank #1 (Strong Buy). The Chef's Warehouse has a trailing four-quarter earnings surprise of 372.3%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for CHEF’s current financial-year EPS suggests significant growth from the year-ago reported number.
Lamb Weston, which produces, distributes and markets value-added frozen potato products, carries a Zacks Rank #2 (Buy). Lamb Weston has a trailing four-quarter earnings surprise of 18.1%, on average.
The Zacks Consensus Estimate for LW’s current financial-year sales suggests growth of 9.3% from the year-ago reported number.
Campbell Soup, which manufactures and markets food and beverage products, currently carries a Zacks Rank #2. Campbell Soup has a trailing four-quarter earnings surprise of 10.8%, on average.
The Zacks Consensus Estimate for CPB’s current financial-year sales suggests growth of 0.5% from the year-ago reported figure.
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B&G Foods (BGS) Down 15% in 3 Months: High Costs a Key Reason
B&G Foods, Inc. (BGS - Free Report) appears to be in not-so-great shape, with its shares down 15.3% in the past three months compared with the industry’s decline of 8.7%. The company has been encountering severe cost headwinds, which, along with supply-chain disruptions, led management to lower its adjusted EBITDA and earnings per share (EPS) view for fiscal 2022 when it reported first-quarter results.
The company expects adjusted EBITDA for fiscal 2022 in the range of $348-$358 million compared with the $358-$368 million range forecast earlier and the $358 million recorded in fiscal 2021. The adjusted EPS in fiscal 2022 is envisioned to be nearly in the band of $1.65-$1.75 now, down from the $1.70-$1.85 band projected before. In fiscal 2021, the metric came in at $1.88.
Let’s take a closer look at the downsides of this Zacks Rank #4 (Sell) company.
Image Source: Zacks Investment Research
Things Not So Rosy for B&G Foods
B&G Foods has been battling cost inflation like many other industry players. In the first quarter of 2022, the company’s adjusted gross profit came in at $101.3 million compared with $117.8 million in the year-ago period. The adjusted gross margin of 19% contracted 430 basis points (bps). The gross margin was hurt by greater-than-anticipated input cost inflation. This includes escalated raw materials (like oil, wheat, corn, fuel and other commodities) and transportation expenses.
Adjusted EBITDA decreased by 16.2% to $77.9 million due to the same factors impacting the adjusted EPS. The adjusted EBITDA margin contracted 380 bps to 14.6%. On its first-quarter earnings call, management stated that it anticipates similar levels of margin compression during the second quarter.
BGS expects the input cost inflation to have a considerably industry-wide effect in the remainder of fiscal 2022. Management expects cost of goods sold inflation in 2022 to be 19-20%. It expects to keep seeing significant cost inflation for inputs, such as ingredients, packaging and transportation, due to factors like the pandemic, the Ukraine war, weather conditions, supply-chain hurdles and the shortage of labor.
On its first-quarter 2022 call, management stated that apart from cost inflation, other pandemic-related factors, such as the duration of social distancing and stay-at-home trends, other waves or variants of the pandemic, the operation of manufacturing facilities, the company’s ability to procure ingredients and other raw materials and supply-chain status, among others, may impact the company’s performance.
Wrapping Up
B&G Foods is on track to mitigate the impact of inflation by undertaking cost-saving initiatives, increasing list prices and locking in prices via short-term supply contracts and advance commodities purchase agreements. That said, these may not fully offset additional cost headwinds in the remaining part of fiscal 2022.
Solid Food Stocks
Some better-ranked stocks are The Chef's Warehouse (CHEF - Free Report) , Lamb Weston (LW - Free Report) and Campbell Soup (CPB - Free Report) .
The Chef's Warehouse, which engages in the distribution of specialty food products, sports a Zacks Rank #1 (Strong Buy). The Chef's Warehouse has a trailing four-quarter earnings surprise of 372.3%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for CHEF’s current financial-year EPS suggests significant growth from the year-ago reported number.
Lamb Weston, which produces, distributes and markets value-added frozen potato products, carries a Zacks Rank #2 (Buy). Lamb Weston has a trailing four-quarter earnings surprise of 18.1%, on average.
The Zacks Consensus Estimate for LW’s current financial-year sales suggests growth of 9.3% from the year-ago reported number.
Campbell Soup, which manufactures and markets food and beverage products, currently carries a Zacks Rank #2. Campbell Soup has a trailing four-quarter earnings surprise of 10.8%, on average.
The Zacks Consensus Estimate for CPB’s current financial-year sales suggests growth of 0.5% from the year-ago reported figure.