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B&G Foods stock upgraded by Piper Sandler on potential sale of segment

EditorEmilio Ghigini
Published 05/16/2024, 05:19 AM

On Thursday, B&G Foods (NYSE:BGS) stock received an upgrade from Piper Sandler from Underweight to Neutral, with an increased price target to $9.00 from the previous $8.00.

The shift in rating comes as B&G Foods considers divesting its Frozen & Vegetables business, which accounts for approximately 20% of its revenue and 10% of its EBITDA. Despite the segment's declining sales and low margins, the analyst notes the potential sale is not expected to jeopardize the company's dividend.

The analyst further elaborates that the potential proceeds from the sale, although likely to be at modest multiples due to the segment's performance, could contribute to an improvement in B&G Foods' net debt to EBITDA ratio, assuming the funds are used for debt reduction.

The firm maintains its earnings per share estimates for B&G Foods at $0.80 for 2024 and $0.87 for 2025, with a price target that reflects approximately 10 times the projected 2025 earnings.

The upgrade to a Neutral stance is attributed to the belief that the recent decline in B&G Foods' share price has balanced the downside risks. The analyst's perspective indicates that the potential segment sale, along with the current stock valuation, has mitigated concerns over further stock depreciation.

B&G Foods has not yet confirmed any details regarding the sale of its Frozen & Vegetables segment. The company's decision to explore this option is part of a strategic review to enhance shareholder value, particularly in light of the challenges faced by the underperforming division.

InvestingPro Insights

As B&G Foods (NYSE:BGS) contemplates strategic changes, including the possible divestiture of its Frozen & Vegetables segment, investors are keenly observing the company's financial health and market performance. According to InvestingPro, B&G Foods' market capitalization stands at $715.41 million, with an adjusted price-to-earnings (P/E) ratio for the last twelve months as of Q1 2024 at 10.73. This figure suggests a more favorable valuation in comparison to the negative P/E ratio currently reported. Moreover, the company has experienced a significant return over the last week, with a 9.3% price total return, signaling a positive short-term investor sentiment.

InvestingPro Tips highlight that B&G Foods has maintained dividend payments for 18 consecutive years, echoing the analyst's expectation that the potential sale will not impact the company's dividend payments. The current dividend yield is at a robust 8.4%, which is particularly attractive to income-focused investors. Additionally, despite a revenue decline of 5.45% over the last twelve months as of Q1 2024, the company's liquid assets exceed short-term obligations, indicating a degree of financial stability.

For those interested in a deeper analysis, there are additional InvestingPro Tips available, which provide further insights into B&G Foods' financial metrics and future outlook. To explore these valuable insights and benefit from an informed investment decision, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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