B&G Foods, Inc. (BGS) is set to report third-quarter fiscal 2014 results on Oct 21, after the market closes. Last quarter, it posted a negative surprise of 15.38%. Let’s see how things are shaping up for this announcement.
Factors to Consider This Quarter
B&G Foods has been facing weakness in prices of the base business, soft margins and rising expenses, which have been hurting its earnings for the past few quarters. Also the acquisitions made since May 2013 (Pirate Brands, Specialty Brands, the Rickland Orchards brand and the TrueNorth brand) put pressure on short-term cost and efficiencies, thereby hurting earnings. We believe these headwinds are expected to impact third quarter 2014 performance.
In fact, at the second quarter 2014 conference call, B&G Foods reduced its guidance for fiscal 2014 to account for added expenses associated with its aggressive acquisition strategy.
The food company reduced its full-year 2014 adjusted EBITDA expectation by 2.4% to a range of $204.0 million to $209.0 million compared to the prior expected range of $209.0 million to $214.0 million. Adjusted earnings per share for fiscal 2014 are expected in a range of $1.54 to $1.60, lower than the prior guidance of $1.59 to $1.65.
Despite the higher expenses related to the acquisitions, net sales have been benefiting from solid sales from acquired brands including Pirate Brands, Specialty Brands, the Rickland Orchards brand and the TrueNorth brand during the past few quarters.
Earnings Whisper?
Our proven model does not conclusively show that B&G Foods is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here, as you will see below.
Zacks ESP: The Earnings ESP for B&G Foods is 0.00% as both the Most accurate estimate and the Zacks Consensus Estimate stand at 40 cents.
Zacks Rank #3 (Hold): Though Zacks Ranks #1, 2 or 3 increase the predictive power of ESP, B&G Foods’ ESP of 0.00% makes surprise prediction difficult.
We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Other Stocks to Consider
Here are some other companies in the consumer staples sector that can be considered as our model shows that they have the right combination of elements to post an earnings beat this quarter:
Post Holdings, Inc. (POST) has an Earnings ESP of +50.00% and a Zacks Rank #1 (Strong Buy).
The Clorox Company (CLX) has an Earnings ESP of +1.94% and a Zacks Rank #3
SUPERVALU Inc. (SVU) has an Earnings ESP of +9.09% and a Zacks Rank #3
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