What happened
Shares of B&G Foods (NYSE: BGS) were down 11.2% as of 2 p.m. ET on Wednesday after analysts at Piper Sandler downgraded the stock.
So what
Citing an 11.5% quarterly decline in B&G's U.S. retail sales according to data from retail-industry tracker SPINS/IRI (far below previous estimates for a 4.5% drop), Piper Sandler analysts lowered their rating on the leading consumer packaged-goods stock to underweight from neutral. The firm also reduced its per-share price target on B&G to $8 from $14, well below yesterday's closing price of $9.48.
Piper Sandler added that B&G's divestiture of its Back to Nature brand contributed a sales headwind of roughly 2 percentage points, and reduced Piper's own projections for organic sales in the third quarter to fall 7.5%.
To make matters worse, Piper Sandler expects B&G's earnings per share will come under pressure due to recent dilution and higher interest expenses. Indeed, just last week, the company closed on a previously announced $550 million private offering of 8% senior secured notes due in 2028. The offering effectively pushed back B&G's previous obligation to repay a tranche of notes due in 2025, which had a lower 5.25% interest rate.
Now what
B&G Foods typically announces third-quarter results in early November. Most analysts, on average, are anticipating a 4.4% decline in revenue to $509.5 million and earnings of $0.25 per share (down from $0.31 a year earlier). But if the downgrade today is on point, those estimates might well prove to be optimistic when official results are disclosed.
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Steve Symington 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.
