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Is B&G Foods Stock a Buy or Hold at a P/E Multiple of 10.7X?
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B&G Foods, Inc. (BGS - Free Report) is currently trading at a notably low price-to-earnings (P/E) multiple, which is below the Zacks Food – Miscellaneous industry and broader Consumer Staples averages. With a forward 12-month P/E ratio of 10.69, BGS stands below the industry average of 16.21X and the sector’s 17.94X.
Image Source: Zacks Investment Research
The stock is undervalued compared with its industry peers, offering compelling value to investors looking for exposure to the consumer staple sector. Furthermore, BGS's Value Score of A underscores its appeal as a potential investment.
Over the past three months, B&G Foods shares have gained 8.6%, outpacing the industry’s growth of 7.5%. The company’s strategic restructuring, along with shedding non-core assets, has helped it outperform the broader sector and the S&P 500 index, which grew 6.4% and 1.9%, respectively, during the same period.
Image Source: Zacks Investment Research
Closing at $8.22 on Monday, B&G Foods stock is currently trading 31% below its 52-week high of $11.97, attained on March 1.
BGS Stock’s Growth Strategy Fueled by Portfolio Refining Moves
B&G Foods is focusing on a strategic restructuring to optimize its portfolio and drive future growth. The divestiture of the Green Giant U.S. Canned Vegetable business is a significant step in this process. The company is also reviewing the potential sale of its frozen and remaining canned vegetable businesses, which could improve margins and overall portfolio focus.
By shedding non-core assets, B&G Foods likely aims to streamline its operations, enhance profitability and improve cash flow. This could allow the company to concentrate on higher-growth or more strategically aligned businesses, ultimately improving its ability to create long-term value for stakeholders.
B&G Foods' strategic moves, such as selling the Green Giant U.S. shelf-stable product line to Seneca Foods and exiting the lower-margin Back to Nature brand, highlight the company's commitment to reshaping its portfolio for stronger future growth. By divesting from smaller, less profitable segments, B&G Foods is freeing up resources to focus on its core, higher-margin segments like Spices & Flavor Solutions and Meals.
More on BGS Stock
B&G Foods has a strong pipeline of product innovation, particularly in its Frozen & Vegetables segment. The upcoming launches of Veggie Ramen and premium side dishes are aligned with current health and dietary trends, potentially enhancing demand in the back half of the year.
B&G Foods' Spices & Flavor Solutions unit is a key driver of its success, with an impressive performance in the second quarter of 2024. The 4.9% increase in net sales and the 5.9% rise in adjusted EBITDA highlight the strong demand within the spices and seasonings category. This business unit not only contributes significantly to B&G Foods' revenues but also boasts the highest adjusted EBITDA margin, underscoring its profitability and operational efficiency.
B&G Foods has expanded through over 50 acquisitions since 1996, including key brands like Crisco, Farmwise, Clabber Girl and Ortega. The recent acquisition of Growers Express’ frozen vegetable operations in May 2023 strengthens its presence in frozen foods. These acquisitions diversify B&G’s portfolio, positioning it for long-term growth and increased market share.
What Could Derail the BGS Stock’s Momentum?
Despite the positive factors, B&G Foods has been grappling with category-wide challenges. The company has been witnessing soft sales for the past few quarters. The trend continued in the second quarter of fiscal 2024, wherein the top and bottom lines declined year over year.
B&G Foods’ Foodservice sales in the Syrup category remained weak in the second quarter due to declining restaurant traffic. While the rate of decline has slowed, food service remains a vulnerable part of the business, with sales falling 3% in the second quarter of 2024.
Taking into account such headwinds, management lowered its fiscal 2024 outlook. For fiscal 2024, management now anticipates net sales in the range of $1.945-$1.970 billion compared with the earlier view of $1.955-$1.985 billion.
The company anticipates adjusted EBITDA in the range of around $300-$315 million, compared with $300-$320 million expected earlier. Adjusted earnings per share (EPS) for fiscal 2024 are envisioned to be between 70 cents and 90 cents, down from the earlier expectation of between 75 cents and 90 cents. In fiscal 2023, the company posted adjusted EPS of 99 cents.
How to Play BGS Stock?
Investors may consider BGS stock due to its appealing valuation and robust growth potential. The company has positioned itself to capitalize on its segments, with a greater focus on innovation, operational efficiency and building strategic market share in key areas.
However, the lowered fiscal 2024 guidance and continued headwinds across various segments necessitate careful monitoring of the company’s progress. For current investors, holding onto BGS stock appears prudent. The company currently carries a Zacks Rank #3 (Hold).
Don’t Miss These Solid Bets
Sprouts Farmers (SFM - Free Report) , which is engaged in the retailing of fresh, natural and organic food products, currently sports a Zacks Rank #1 (Strong Buy). SFM has a trailing four-quarter earnings surprise of 12%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Sprouts Farmers’ current financial-year sales and earnings implies growth of around 9.6% and 18.7%, respectively, from the year-ago reported numbers.
The Chefs' Warehouse (CHEF - Free Report) is a premier distributor of specialty food products in the United States, the Middle East and Canada. It currently carries a Zacks Rank #2 (Buy). CHEF has a trailing four-quarter earnings surprise of 33.7%, on average.
The Zacks Consensus Estimate for Chefs' current financial-year sales and earnings suggests growth of around 9.7% and 12.6%, respectively, from the year-ago reported numbers.
Flowers Foods (FLO - Free Report) , one of the largest producers of packaged bakery foods in the United States, currently carries a Zacks Rank #2. FLO has a trailing four-quarter earnings surprise of 1.9%, on average.
The Zacks Consensus Estimate for Flowers Foods’ current financial-year sales and earnings calls for growth of around 1% and 5%, respectively, from the year-ago reported numbers.
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Is B&G Foods Stock a Buy or Hold at a P/E Multiple of 10.7X?
B&G Foods, Inc. (BGS - Free Report) is currently trading at a notably low price-to-earnings (P/E) multiple, which is below the Zacks Food – Miscellaneous industry and broader Consumer Staples averages. With a forward 12-month P/E ratio of 10.69, BGS stands below the industry average of 16.21X and the sector’s 17.94X.
Image Source: Zacks Investment Research
The stock is undervalued compared with its industry peers, offering compelling value to investors looking for exposure to the consumer staple sector. Furthermore, BGS's Value Score of A underscores its appeal as a potential investment.
Over the past three months, B&G Foods shares have gained 8.6%, outpacing the industry’s growth of 7.5%. The company’s strategic restructuring, along with shedding non-core assets, has helped it outperform the broader sector and the S&P 500 index, which grew 6.4% and 1.9%, respectively, during the same period.
Image Source: Zacks Investment Research
Closing at $8.22 on Monday, B&G Foods stock is currently trading 31% below its 52-week high of $11.97, attained on March 1.
BGS Stock’s Growth Strategy Fueled by Portfolio Refining Moves
B&G Foods is focusing on a strategic restructuring to optimize its portfolio and drive future growth. The divestiture of the Green Giant U.S. Canned Vegetable business is a significant step in this process. The company is also reviewing the potential sale of its frozen and remaining canned vegetable businesses, which could improve margins and overall portfolio focus.
By shedding non-core assets, B&G Foods likely aims to streamline its operations, enhance profitability and improve cash flow. This could allow the company to concentrate on higher-growth or more strategically aligned businesses, ultimately improving its ability to create long-term value for stakeholders.
B&G Foods' strategic moves, such as selling the Green Giant U.S. shelf-stable product line to Seneca Foods and exiting the lower-margin Back to Nature brand, highlight the company's commitment to reshaping its portfolio for stronger future growth. By divesting from smaller, less profitable segments, B&G Foods is freeing up resources to focus on its core, higher-margin segments like Spices & Flavor Solutions and Meals.
More on BGS Stock
B&G Foods has a strong pipeline of product innovation, particularly in its Frozen & Vegetables segment. The upcoming launches of Veggie Ramen and premium side dishes are aligned with current health and dietary trends, potentially enhancing demand in the back half of the year.
B&G Foods' Spices & Flavor Solutions unit is a key driver of its success, with an impressive performance in the second quarter of 2024. The 4.9% increase in net sales and the 5.9% rise in adjusted EBITDA highlight the strong demand within the spices and seasonings category. This business unit not only contributes significantly to B&G Foods' revenues but also boasts the highest adjusted EBITDA margin, underscoring its profitability and operational efficiency.
B&G Foods has expanded through over 50 acquisitions since 1996, including key brands like Crisco, Farmwise, Clabber Girl and Ortega. The recent acquisition of Growers Express’ frozen vegetable operations in May 2023 strengthens its presence in frozen foods. These acquisitions diversify B&G’s portfolio, positioning it for long-term growth and increased market share.
What Could Derail the BGS Stock’s Momentum?
Despite the positive factors, B&G Foods has been grappling with category-wide challenges. The company has been witnessing soft sales for the past few quarters. The trend continued in the second quarter of fiscal 2024, wherein the top and bottom lines declined year over year.
B&G Foods’ Foodservice sales in the Syrup category remained weak in the second quarter due to declining restaurant traffic. While the rate of decline has slowed, food service remains a vulnerable part of the business, with sales falling 3% in the second quarter of 2024.
Taking into account such headwinds, management lowered its fiscal 2024 outlook. For fiscal 2024, management now anticipates net sales in the range of $1.945-$1.970 billion compared with the earlier view of $1.955-$1.985 billion.
The company anticipates adjusted EBITDA in the range of around $300-$315 million, compared with $300-$320 million expected earlier. Adjusted earnings per share (EPS) for fiscal 2024 are envisioned to be between 70 cents and 90 cents, down from the earlier expectation of between 75 cents and 90 cents. In fiscal 2023, the company posted adjusted EPS of 99 cents.
How to Play BGS Stock?
Investors may consider BGS stock due to its appealing valuation and robust growth potential. The company has positioned itself to capitalize on its segments, with a greater focus on innovation, operational efficiency and building strategic market share in key areas.
However, the lowered fiscal 2024 guidance and continued headwinds across various segments necessitate careful monitoring of the company’s progress. For current investors, holding onto BGS stock appears prudent. The company currently carries a Zacks Rank #3 (Hold).
Don’t Miss These Solid Bets
Sprouts Farmers (SFM - Free Report) , which is engaged in the retailing of fresh, natural and organic food products, currently sports a Zacks Rank #1 (Strong Buy). SFM has a trailing four-quarter earnings surprise of 12%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Sprouts Farmers’ current financial-year sales and earnings implies growth of around 9.6% and 18.7%, respectively, from the year-ago reported numbers.
The Chefs' Warehouse (CHEF - Free Report) is a premier distributor of specialty food products in the United States, the Middle East and Canada. It currently carries a Zacks Rank #2 (Buy). CHEF has a trailing four-quarter earnings surprise of 33.7%, on average.
The Zacks Consensus Estimate for Chefs' current financial-year sales and earnings suggests growth of around 9.7% and 12.6%, respectively, from the year-ago reported numbers.
Flowers Foods (FLO - Free Report) , one of the largest producers of packaged bakery foods in the United States, currently carries a Zacks Rank #2. FLO has a trailing four-quarter earnings surprise of 1.9%, on average.
The Zacks Consensus Estimate for Flowers Foods’ current financial-year sales and earnings calls for growth of around 1% and 5%, respectively, from the year-ago reported numbers.