B&G Foods, Inc.

BGS Details

B&G Foods, Inc. (NYSE: BGS), along with its subsidiaries, is engaged in the manufacturing, selling, and distributing high-quality, branded shelf-stable and frozen foods across the United States, Canada, and Puerto Rico. The company boasts of a diverse portfolio with more than 50 brands.

Results Performance for the Third Quarter Ended 2 October 2021 (Q3FY21)

• The net sales stood at $515.0 million in Q3FY21, up 3.9% YoY, driven by the Crisco acquisition. Net sales and base business net sales for Q3FY21 were 26.7% and 9.2% higher than pre-pandemic net sales and base business net sales for Q3FY20.
• Adjusted EBITDA stood at $96.2 million in Q3FY21, down 8.1% YoY.
• Diluted earnings per share fell 55.6% YoY to $0.32 in Q3FY21, and adjusted diluted earnings per share fell 25.7% YoY to $0.55 in Q3FY21.
• Net income fell 55.7% YoY to $20.7 million in Q3FY21, and adjusted net income fell 24.5% YoY to $36.2 million in Q3FY21.

Source: Company Reports, Analysis by Kalkine Group

Outlook

The management continues to see elevated demand for products as consumers extended cooking and baking at home due to COVID-19 related circumstances. Moreover, it has initiated various revenue-enhancing activities and cost savings to offset increasing costs. Net sales will be positively impacted will the full twelve months of ownership of the Crisco brand.

Guidance for FY21: Net sales will be in the range of $2.05-$2.10 billion, and adjusted EBITDA will be $358.0-$365.0 million.

Key Risks

The company’s performance is exposed to various risks, including hardening of raw materials, packaging, ingredients, and distribution costs. Further, the adverse impact of higher competition, changes in consumer preferences, and any slowdown in demand for its products, among others, also poses key challenges.

Valuation Methodology: EV/Sales Based Relative Valuation (Illustrative)

Stock Recommendation

The company has delivered a 6-month and 1-year return of ~+4.66% and ~+18.15%, respectively. However, the stock is trading lower than the average of the 52-week high price of $47.78 and the 52-week low price of $25.81.

The stock has been valued using an EV/Sales multiple based illustrative relative valuation method and arrived at a target price that reflects a low double-digit decline (in percentage terms). The company might trade at a slight discount to its peers’ average (NTM basis), considering a fall in the net margin at 4.0% in Q3FY21 versus 9.4% in Q3FY20 and a longer Cash Conversion Cycle at 126.2 days in Q3FY21 versus 103.8 days in Q3FY20.

Considering the factors above, current trading levels, and the associated business risks, we advise the investors to book profits. Accordingly, we give a “Sell” rating on the stock at the current market price of $32.39 per share as of 18^th November 2021 (Time: 9:30AM AM, NY, USA).

Technical Overview

Daily Price Chart

Source: REFINITIV

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decisions should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.

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