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Category: B&G Foods (BGS)
Date: 6 November 2020 Stock price of B&G Foods: $28.20 We take a look at the 3rd quarter 2020 earnings report of B&G Foods (BGS) a manufacturer, seller and distributor of high-quality, branded shelf-stable and frozen foods across the USA. For the 3rd quarter of 2020 the group reported net sales of $495.8 million and net income of $46.8 million.
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Kenneth G. Romanzi, President and Chief Executive Officer of B&G Foods - During the quarter, B&G Foods continued to benefit from very strong demand for our products as a result of the ongoing COVID-19 pandemic. Our portfolio of brands and products are very well-suited for the stay at home, work at home, cook and eat at home world "
More About B&G Foods
Based in Parsippany, New Jersey, B&G Foods and its subsidiaries manufacture, sell and distribute high-quality, branded shelf-stable and frozen foods across the United States, Canada and Puerto Rico. With B&G Foods’ diverse portfolio of more than 50 brands you know and love, including Back to Nature, B&G, B&M, Cream of Wheat, Dash, Green Giant, Las Palmas, Le Sueur, Mama Mary’s, Maple Grove Farms, New York Style, Ortega, Polaner, Spice Islands and Victoria, there’s a little something for everyone.
Overview of B&G Foods 3rd quarter 2020 earnings report
Third Quarter 2020 Financial Summary (vs. Third Quarter 2019 where applicable):
- Net sales increased 22.0% to $495.8 million
- Base business net sales1 increased 21.9% to $495.4 million
- Diluted earnings per share increased 50.0% to $0.72
- Adjusted diluted earnings per share1 increased 37.0% to $0.74
- Net income increased 50.6% to $46.8 million
- Adjusted net income increased 37.4% to $47.9 million
- Adjusted EBITDA increased 21.3% to $104.6 million
B&G Foods management commentary on their 3rd quarter 2020 earnings
PARSIPPANY, N.J.--(BUSINESS WIRE)--Nov. 5, 2020-- B&G Foods, Inc. (NYSE: BGS) today announced financial results for the third quarter and first three quarters of 2020, which include the favorable impact of continued strong demand for the Company’s products due to the ongoing COVID-19 pandemic and an extra reporting week in the third quarter and first three quarters of 2020 as compared to the third quarter and first three quarters of 2019.
Commenting on the results, Kenneth G. Romanzi, President and Chief Executive Officer of B&G Foods, stated, “During the quarter, B&G Foods continued to benefit from very strong demand for our products as a result of the ongoing COVID-19 pandemic. Our portfolio of brands and products are very well-suited for the stay at home, work at home, cook and eat at home world. Thanks to the tremendous efforts of our employees, to date we have been able to keep our employees safe, avoid material disruptions to our supply chain and capitalize on the unprecedented increase in demand. We expect to see continued strong demand for our products throughout the fourth quarter and into 2021.” Mr. Romanzi continued, “We are also very excited to be adding the Crisco brand of oils and shortening to our family of brands and expect to close the Crisco acquisition during the fourth quarter. Consistent with our acquisition strategy, the acquisition is expected to be immediately accretive to our earnings per share and free cash flow.”
Guidance for Full Year Fiscal 2020 (excluding the impact of the pending Crisco acquisition):
Commenting on the results, Kenneth G. Romanzi, President and Chief Executive Officer of B&G Foods, stated, “During the quarter, B&G Foods continued to benefit from very strong demand for our products as a result of the ongoing COVID-19 pandemic. Our portfolio of brands and products are very well-suited for the stay at home, work at home, cook and eat at home world. Thanks to the tremendous efforts of our employees, to date we have been able to keep our employees safe, avoid material disruptions to our supply chain and capitalize on the unprecedented increase in demand. We expect to see continued strong demand for our products throughout the fourth quarter and into 2021.” Mr. Romanzi continued, “We are also very excited to be adding the Crisco brand of oils and shortening to our family of brands and expect to close the Crisco acquisition during the fourth quarter. Consistent with our acquisition strategy, the acquisition is expected to be immediately accretive to our earnings per share and free cash flow.”
Guidance for Full Year Fiscal 2020 (excluding the impact of the pending Crisco acquisition):
- Net sales range of $1.950 billion to $1.970 billion
- Adjusted EBITDA range of $360.0 million to $370.0 million
- Adjusted diluted earnings per share range of $2.30 to $2.40
Full Year Fiscal 2020 Guidance
For fiscal 2020, net sales are expected to be approximately $1.950 billion to $1.970 billion, adjusted EBITDA is expected to be approximately $360.0 million to $370.0 million and adjusted diluted earnings per share is expected to be approximately $2.30 to $2.40. For fiscal 2020, capital expenditures are expected to be approximately $40.0 million to $45.0 million.
The Company’s full year fiscal 2020 guidance excludes the impact of the pending acquisition of the Crisco brand, which is expected to close in the fourth quarter of 2020.
B&G Foods provides earnings guidance only on a non-GAAP basis and does not provide a reconciliation of the Company’s forward-looking adjusted EBITDA and adjusted diluted earnings per share guidance to the most directly comparable GAAP financial measures because of the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliations, including adjustments that could be made for deferred taxes; loss on extinguishment of debt; acquisition/divestiture-related and non-recurring expenses, gains and losses; gains and losses on the sale of assets and other charges reflected in the Company’s reconciliation of historic non-GAAP financial measures, the amounts of which, based on past experience, could be material. For additional information regarding B&G Foods’ non-GAAP financial measures, see “About Non-GAAP Financial Measures and Items Affecting Comparability” below.
Agreement to Acquire the Crisco Brand
On October 26, 2020, B&G Foods announced that it had entered into an agreement to acquire the Crisco brand of oils and shortening from The J. M. Smucker Co. for approximately $550.0 million in cash, subject to a post-closing adjustment based upon inventory at closing. As part of the acquisition, B&G Foods is also acquiring a manufacturing facility and warehouse in Cincinnati, Ohio. The asset purchase agreement includes an agreement for Smucker to provide certain transition services associated with the acquired business for up to nine to twelve months following closing. Subject to regulatory approval and the satisfaction of customary closing conditions set forth in the asset purchase agreement, B&G Foods expects the acquisition to close during the fourth quarter of 2020.
B&G Foods projects that in 2021, the acquired business will continue to benefit from increased demand due to the COVID-19 pandemic and generate annual net sales of approximately $270.0 million, adjusted EBITDA in the range of $65.0 million to $70.0 million and adjusted diluted earnings per share in the range of $0.45 to $0.50. Because the acquisition will be structured as an asset purchase, B&G Foods expects to realize approximately $75.0 million in tax benefits on a net present value basis. At the midpoint of B&G Foods’ 2021 projected adjusted EBITDA for the business, the acquisition represents a purchase price multiple of approximately 8.1 times adjusted EBITDA (or 7.0 times adjusted EBITDA net of expected tax benefits). B&G Foods expects to fund the acquisition and related fees and expenses with cash on hand and revolving loans under its existing credit facility.
For fiscal 2020, net sales are expected to be approximately $1.950 billion to $1.970 billion, adjusted EBITDA is expected to be approximately $360.0 million to $370.0 million and adjusted diluted earnings per share is expected to be approximately $2.30 to $2.40. For fiscal 2020, capital expenditures are expected to be approximately $40.0 million to $45.0 million.
The Company’s full year fiscal 2020 guidance excludes the impact of the pending acquisition of the Crisco brand, which is expected to close in the fourth quarter of 2020.
B&G Foods provides earnings guidance only on a non-GAAP basis and does not provide a reconciliation of the Company’s forward-looking adjusted EBITDA and adjusted diluted earnings per share guidance to the most directly comparable GAAP financial measures because of the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliations, including adjustments that could be made for deferred taxes; loss on extinguishment of debt; acquisition/divestiture-related and non-recurring expenses, gains and losses; gains and losses on the sale of assets and other charges reflected in the Company’s reconciliation of historic non-GAAP financial measures, the amounts of which, based on past experience, could be material. For additional information regarding B&G Foods’ non-GAAP financial measures, see “About Non-GAAP Financial Measures and Items Affecting Comparability” below.
Agreement to Acquire the Crisco Brand
On October 26, 2020, B&G Foods announced that it had entered into an agreement to acquire the Crisco brand of oils and shortening from The J. M. Smucker Co. for approximately $550.0 million in cash, subject to a post-closing adjustment based upon inventory at closing. As part of the acquisition, B&G Foods is also acquiring a manufacturing facility and warehouse in Cincinnati, Ohio. The asset purchase agreement includes an agreement for Smucker to provide certain transition services associated with the acquired business for up to nine to twelve months following closing. Subject to regulatory approval and the satisfaction of customary closing conditions set forth in the asset purchase agreement, B&G Foods expects the acquisition to close during the fourth quarter of 2020.
B&G Foods projects that in 2021, the acquired business will continue to benefit from increased demand due to the COVID-19 pandemic and generate annual net sales of approximately $270.0 million, adjusted EBITDA in the range of $65.0 million to $70.0 million and adjusted diluted earnings per share in the range of $0.45 to $0.50. Because the acquisition will be structured as an asset purchase, B&G Foods expects to realize approximately $75.0 million in tax benefits on a net present value basis. At the midpoint of B&G Foods’ 2021 projected adjusted EBITDA for the business, the acquisition represents a purchase price multiple of approximately 8.1 times adjusted EBITDA (or 7.0 times adjusted EBITDA net of expected tax benefits). B&G Foods expects to fund the acquisition and related fees and expenses with cash on hand and revolving loans under its existing credit facility.
B&G Foods (BGS) stock price history over the last 5 years
The image below, obtained from Google, shows the stock price history of B&G Foods (BGS) over the last 5 years. And it's not been a good time for B&G Foods stockholders. 5 years ago the stock of B&G Foods was trading at $36 a stock and its currently trading at $28.20. That's a loss of -21.7% suffered by B&G Foods stockholders over the last 5 years.
The stock of B&G Foods (BGS) is trading at a lot closer to its 52 week high than it is to its 52 week low, which is a clear indication that the short term sentiment and momentum of B&G Foods stock is positive at this point in time.
The stock of B&G Foods (BGS) is trading at a lot closer to its 52 week high than it is to its 52 week low, which is a clear indication that the short term sentiment and momentum of B&G Foods stock is positive at this point in time.
B&G Foods (BGS) stock vs Campbell Soup Company (CPB) stock over the last 5 years
The image below shows the stock of B&G Foods (BGS) stock vs Campbell Soup Company (CPB) stock over the last 5 years. Both these firms are active in the manufacture and selling of condiments and shelf-stable products. The summary below shows the stock price performance of these two firms over the last 5 years.
While both firms stock has declined over the last 5 years, the stock of Campbell Soup Company has declined by far less than that of B&G Foods.
- Campbell Soup Company (CPB): -8.8%
- B&G Foods (BGS): -21.7%
While both firms stock has declined over the last 5 years, the stock of Campbell Soup Company has declined by far less than that of B&G Foods.
Stock valuation of B&G Foods (BGS)
So based on B&G Foods 3rd quarter 2020 earnings report, what do we value the group's stock at? Based on the earnings report our stock valuation model provides a target price of $39.20 per B&G Foods stock. We therefore believe the stock of B&G Foods are undervalued at its current price of $28.20
We usually recommend that long term fundamental and value investors look to enter a stock at least 10% below our target price, which in this case is $39.20 . Therefore a good entry point into the stock of B&G Foods we be at $35.30 or below.
Since the stock of B&G Foods (BGS) is trading at well below our suggested entry point we rate the stock of B&G Foods as a buy
We usually recommend that long term fundamental and value investors look to enter a stock at least 10% below our target price, which in this case is $39.20 . Therefore a good entry point into the stock of B&G Foods we be at $35.30 or below.
Since the stock of B&G Foods (BGS) is trading at well below our suggested entry point we rate the stock of B&G Foods as a buy
Next earnings release of B&G Foods (BGS)
It is expected that B&G Foods will release their 4th quarter 2020 earnings report in early February 2021
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