What is Wrong With B&G Foods?

B&G Foods has been in business for 130 years and acquired many well known food brands over the years. Brands like Green Giant, Ortega, and Spice Islands are part of the company’s portfolio. In the past decade, the company has added more than 50 brands to its portfolio and expanded its supply chain.

Recently, the company announced disappointing earnings for its second quarter. While B&G has a reputation for buying underperforming brands from larger companies, the company’s stock price has dropped sharply following the report. Its shares are down by 37% since the quarter ended. Inflation and the sale of stock were two main reasons for this downward turn.

B&G Foods manufactures and distributes a portfolio of shelf-stable and frozen foods. Their portfolio includes bagel chips, cooking oils and vegetable shortening, fruit spreads, and salad dressings. The company is also expanding its product line with more organic, fresher ingredients, including herbs and spices.

B&G Foods’ latest quarterly report showed that it is struggling to overcome its cost inflation headwinds. While it raised its FY 2022 net sales guidance, it reduced its guidance for adjusted EBITDA and adjusted earnings per share. This reflected the impact of industry-wide inflation of input costs. Additionally, the company faced supply-chain bottlenecks. As a result, B&G Foods’ adjusted gross margin contracted from 24.1% to 16.5%, reflecting greater-than-anticipated input cost inflation.

Although B&G Foods stocks have underperformed the market this year, the company’s recent earnings estimate revisions suggest a positive near-term outlook. Earnings estimate revisions have a strong correlation with near-term stock price movements. This correlation is a major signal that the company will outperform the market in the near term.