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B&G Foods (BGS) Stock Down 19% in 3 Months: How to Play Ahead?

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B&G Foods, Inc. (BGS - Free Report) has not been in the best shape lately, with its shares down 19.5% in the past three months compared with the industry’s decline of 3.9%. The snack food and beverage products stock also trailed the Zacks Consumer Staples and the S&P 500’s respective increase of 2.3% and 12.9% in the same time frame.

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Finishing the last trading session at $8.63, the stock stands 75.6% below its 52-week high of $15.15. This Parsippany, New Jersey-based company’s stock also slipped below critical technical thresholds, such as its 50-day and 200-day moving averages, which are important indicators for gauging market trends and momentum. These heighten investors’ concerns regarding BGS’s ability to navigate current market dynamics.

The overall food industry has been grappling with category-wide challenges, wherein shoppers are becoming increasingly price-sensitive. Being no exception to this pressure, BGS witnessed a slowdown in its sales. The company is also grappling with an elevated cost environment and volatile currency movements. Despite B&G Foods' focus on refining its portfolio to optimize future value generation, is a potential recovery on the horizon? Let's delve into the details.

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Image Source: Zacks Investment Research

Decoding the Recent Slide

B&G Foods, alongside companies like Kraft Heinz (KHC - Free Report) , Campbell Soup (CPB - Free Report) and Conagra Brands (CAG - Free Report) , faces challenges stemming from a volatile macroeconomic landscape. The company has been encountering emerging challenges in foodservice and experiencing a slower recovery in net sales to retail customers. The trend continued in first-quarter fiscal 2024, with the top and the bottom line missing the Zacks Consensus Estimate and declining year over year. The downside was due to foodservice trends and increased promotion spending. Softness in the foodservice and industrial businesses is stemming from an overall slowdown in out-of-home traffic and volumes.

Apart from this, B&G Foods has been grappling with higher selling, general and administrative (SG&A) expenses for a while now. In the fiscal first quarter, the company’s SG&A expenses escalated 4% to $48.6 million due to higher general and administrative expenses, consumer marketing costs, acquisition/divestiture-related costs and non-recurring expenses. As a percentage of net sales, SG&A expenses moved up 1.1 percentage points to 10.2% on a rise in general and administrative costs, mainly caused by modest inflation in wages, insurance and other professional services.

Analyst Sentiment Wavers

B&G Foods is walking a tightrope. The Zacks Consensus Estimate for 2024 earnings per share has moved downward by a cent to 78 cents in the last seven days. This downward adjustment, although small, reflects a negative sentiment among analysts and suggests potential challenges in achieving projected profitability.

Is Recovery Possible?

B&G Foods is actively reshaping its portfolio to enhance focus, improve margins, boost cash flow, and maximize future value creation. The company has a successful track record of acquisition-led growth as it has integrated more than 50 brands into its portfolio since its establishment.

The company's commitment to portfolio reshaping is further underscored by its strategic divestiture decisions. To this end, management sold its Green Giant U.S. shelf-stable product line to Seneca Foods Corporation in November 2023. B&G Foods sold the Back to Nature brand in January 2023 to exit the small, fragmented, lower-margin snacks portfolio. Well, management intends to continue and speed up the restructuring of its portfolio to optimize future value generation.

Wrapping Up

Despite potential benefits, B&G Foods’ path forward remains challenging as it addresses underlying issues, underscoring the critical importance of strategic decision-making and adaptability in an evolving market landscape. Management's efforts to navigate these difficulties have resulted in a cautious outlook for the fiscal 2024, with anticipated net sales between $1.955 billion and $1.985 billion, down from $2.06 billion in the fiscal 2023. Adjusted earnings per share for the fiscal 2024 are expected to range from 75 cents to 95 cents compared with 99 cents reported in the fiscal 2023. This Zacks Rank #4 (Sell) company appears to be a risky bet at present.

You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

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