B&G Foods (BGS) Trims Outlook On Q3 Earnings & Sales Miss

B&G Foods, Inc. (NYSE:BGS) posted third-quarter 2018 results, wherein both top and bottom lines missed the respective Zacks Consensus Estimate. Results were affected by challenging food environment. On the positive side, the company witnessed year-over-year growth in both top and bottom lines.

However, management lowered its outlook for 2018, which raises concerns over this Zacks Rank #4 (Sell) stock that has declined 14.3% in the past three months, significantly underperforming the industry’s drop of 0.4%.

Q2 Highlights

Adjusted earnings came in at 57 cents per share that fell short of the Zacks Consensus Estimate of 59 cents but increased 3.6% year over year.

Net sales of $422.6 million missed the Zacks Consensus Estimate of $433 million. However, the figure advanced 4.1% year over year. The rise is attributable to the contribution of nearly $19.4 million from Back to Nature and McCann’s sales, $11.3 million from acquisitions and $5.2 million improvement in net pricing and unit volumes growth.

Net sales from the company’s base business decreased 0.3% to $376.5 million, owing to $5.4 million decline in unit volumes, partly negated by 1.2% rise in net pricing.

Net sales from Green Giant frozen surged 14% on the back of innovation products from the business. However, Green Giant shelf stable net sales slumped 12.2%.

Adjusted gross margin was 27.2%, which contracted 260 basis points year over year on account of unfavorable mix, and higher input costs stemming from elevated freight, warehouse and procurement expenses. This was partially offset by increase in net pricing.

SG&A expenses dropped 2.5% to $40 million, thanks to a fall in acquisition-related costs, lower consumer marketing costs and a decline in non-recurring expenses. As a percentage of sales, SG&A expenses went down from 10.1% to 9.5%.

Adjusted EBITDA fell 2.3% to $91.9 million in the reported quarter. Adjusted EBITDA margin came in at 21.7%.

B&G Foods, Inc. Price, Consensus and EPS Surprise

Other Financial Updates

The company concluded the quarter with cash and cash equivalents of $26.2 million, long-term debt of $1,723.1 million and shareholders’ equity of $832.6 million. Net cash from operating activities in the third quarter was $34.3 million.

Further, the company concluded the sale of Pirate Brands to The Hershey Company (NYSE:HSY) in the beginning of the fourth quarter. Owing to this sale and repayment of long-term debt, management has revised its 2018 outlook.

2018 Outlook

Management revised its guidance for 2018. It now expects net sales of $1.71-$1.72 billion, down from the old projection of $1.73-$1.75 billion. This outlook includes the impact of the new FASB revenue recognition standard that is expected to reduce net sales by $21.5 million.

Adjusted EBITDA is now anticipated to be $338.0-$343.0 million compared with the old view of $345-$355 million. Finally, the company projects adjusted earnings per share between $1.98 and $2.05 compared with $2.05-$2.15 forecasted earlier.

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