Shares of B&G Foods (NYSE: BGS) were moving higher today after the diversified packaged food company and dividend stock delivered solid results in its fourth-quarter earnings report.
B&G also continued to reorient its portfolio around growth brands.
According to data from S&P Global Market Intelligence, the stock was up 22.5% for the week as of Thursday's close.
Image source: Getty Images.
B&G makes the right moves
B&G, which owns brands such as Green Giant, Ortega, Crisco, and other supermarket staples said that revenue in the fourth quarter fell 7.2% to $578.1 million, which beat estimates at $571.4 million. Base business net sales, which strips out the impact of divestitures including the Green Giant shelf-stable business and its sale of the Back to Nature snack brand, fell 2.3% to $562.3 million.
Management said base business revenue declined in part because of a reduction in pricing related to a decline in costs in Crisco as oil input costs declined. It saw strength in brands like Clabber Girl, which is best known for baking powder, where sales rose 26.3%.
Even as revenue declined in the quarter, B&G reported improving gross margins, which were up 150 basis points to 21.7%. The increase was due to higher prices relative to input costs, lower transportation and warehousing costs, and lower depreciation.
The company took a loss on the sale of the Green Giant shelf-stable product line of $137.7 million last year, and it also took an impairment charge of $20.5 million related to several brands in the quarter, a sign that assets like Baker's Joy and Molly McButter could be losing value.
On the bottom line, adjusted earnings per share fell from $0.40 to $0.30, which topped estimates at $0.29.
CEO Casey Keller said, "B&G Foods' fourth quarter and fiscal 2023 results demonstrated strong progress, with improved margins, stabilizing volumes, stronger cash flows, and a reduction in leverage."
Why B&G stock gained on the news
B&G is primarily favored by income investors because it's a recession-proof, high-yield dividend stock, currently offering a dividend yield of 6.7%.
In addition to the better-than-expected earnings report, its guidance also indicates that the dividend is safe.
For 2024, the company called for revenue of $1.975 billion to $2.02 billion, down 3% from 2023, but slightly ahead of the consensus at $1.99 billion. It also sees adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $305 million to $325 million, and adjusted earnings per share of $0.80 to $1, which is down from $0.99 in 2023, but better than the consensus at $0.85. Finally, its debt balance fell from $2.39 billion to $2.05 billion, which gives the company more financial flexibility.
B&G stock is also cheap enough at a price-to-earnings ratio of 12 to earn a pop on the report.
Should you invest $1,000 in B&G Foods right now?
Before you buy stock in B&G Foods, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and B&G Foods wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than tripled the return of S&P 500 since 2002*.
*Stock Advisor returns as of February 26, 2024
Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
