B&G Foods, Inc. BGS posted fourth-quarter 2018 results, wherein both top and bottom lines missed the Zacks Consensus Estimate and the latter plunged year over year. Rising input and freight costs remained hurdles. Also, results were impacted by Pirates Brands’ divestiture to Hershey HSY, which was concluded early fourth quarter.
For 2019, the company projects adjusted earnings per share between $1.85 and $2.00, which stands way below the current Zacks Consensus Estimate of $2.11. Following the dismal results and a drab view, shares of the company lost 6.4% during yesterday’s after-hours trading session. Moreover, the stock has lost roughly 20% in the past three months, against the S&P 500’s growth of 4.2%.
Q4 Highlights
Adjusted earnings came in at 34 cents per share that came way below the Zacks Consensus Estimate of 52 cents and slumped 40.4% year over year. This can be accountable to lower gross margin, which was hurt by elevated input costs and adverse mix. Apart from B&G Foods, many players in the Food – Miscellaneous industry are grappling with rising input costs.
B&G Foods’ net sales of $458.1 million missed the Zacks Consensus Estimate of $467.8 million in the fourth quarter. Further, the figure dipped 1.8% year over year, owing to lower volumes, which were somewhat compensated by improved pricing. Volumes were hurt by Pirate Brands’ divestiture, which was partly made up by sales from McCann’s, which was acquired in July 2018.
Net sales from the company’s base business inched up by 1.6% to $452.6 million, owing to $5.2 million rise in unit volumes and $2.0 million in net pricing.
Net sales from Green Giant products (including Le Sueur) jumped 4.9% on the back of increased sales of both frozen and shelf stable products. Green Giant frozen net sales advanced 7.3%, backed by favorable consumer response to innovations. Green Giant shelf stable net sales rose 0.7%.
Adjusted gross margin was 19%, which contracted 110 basis points year over year on account of unfavorable mix, and higher input costs stemming from elevated freight, warehouse and procurement expenses. This was partially offset by increase in net pricing.
SG&A expenses dropped 8.4% to $47.6 million, thanks to decline in costs associated with acquisition/divestitures, consumer marketing, warehousing and non-recurring. As a percentage of sales, SG&A expenses went down from 11.1% to 10.4%.
Adjusted EBITDA fell 15.2% to $58.5 million in the reported quarter. Adjusted EBITDA margin crashed 200 bps to 12.8%.
Other Financial Updates
The company concluded the quarter with cash and cash equivalents of $11.6 million, long-term debt of $1,635.9 million and shareholders’ equity of roughly $900 million. Net cash from operating activities grew to $209.5 million in 2018.
In a separate press release, management announced a quarterly dividend of 47.5 cents per share, which is payable on Apr 30, 2019, to shareholders of record as on Mar 29.
Outlook
The company is pleased with its 2018 performance, which reflects record sales and EBITDA. The company is on track to achieve its $2-billion net sales target. Also, B&G Foods met the high end of its inventory reduction goal for 2018, wherein it curtailed inventory by nearly $100 million. However, the company continued to battle freight and input cost headwinds, which couldn’t be completely negated by efficient cost-containment and pricing efforts.
Nevertheless, this Zacks Rank #3 (Hold) company is focused on enhancing cost-saving endeavors, which are expected to yield in 2019. Also, management is on track with its solid pricing initiatives. These factors along with B&G Foods’ concentration on high-margin brands and acquisitions bode well.
All said, management expects net sales of $1.635-$1.665 billion for 2019. Adjusted EBITDA is anticipated to be $305.0-$320.0 million.
For the first quarter of 2019, management projects net sales of $400-$412 million. Adjusted EBITDA is anticipated to be $78-$82 million. Further, management envisions adjusted earnings of 47-52 cents per share, down from the current consensus mark of 54 cents.
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