B&G Foods (BGS) is a food products company with a huge portfolio of well-known brands. They manufacture and market processed and packaged foods across the United States and Canada.
Solid Third Quarter Results
The company reported their Q3 results on Oct 27, 2016.Net sales for the quarter surged 49.2%, thanks mainly to the acquisition of Green Giant.
Gross profit as a percentage of net sales increased to 36.3% from 33.6% in Q3 2015, primarily driven by the acquisition of Green Giant.
Adjusted net income came in at $36.7 million, or $0.56 per share, beating the Zacks Consensus Estimate of $0.52 per share. This was the third consecutive quarterly beat for the company. In the past four quarters, they have posted an average positive quarterly surprise of 12.16%.
After better than expected results and revised guidance, analysts have raised estimates for the company. Zacks Consensus Estimates for the current and the next year are now $2.18 per share and $2.43 per share respectively, up from $2.17 and $2.31, before the results.
The following chart shows earnings and price momentum:
B&G Foods, Inc. Price and Consensus
Growth through Acquisitions
The company continues to grow organically and through acquisitions. In the past 20 years, they have acquired more than 40 brands. They have an excellent record of turning around such heritage brands after acquiring them.
The company completed two acquisitions late last year.
Last month, the company acquired Victoria Fine Foods, the maker of variety of premium pasta and specialty sauces for approximately $70.0 million.
Earlier in November, they completed the acquisition of the spices and seasonings business of ACH Food for $365 million. They expect both the acquisitions to be immediately accretive to earnings and free cash flow.
Returning Cash to Shareholders
The stock has a very juicy dividend yield of 4.2% as of now. In November last year, they increased the dividend rate by 10.7% from $0.42 per share to $0.465 per share.
This is the 49th consecutive quarterly dividend declared since their IPO in October 2004.
The Bottom Line
While shares are not cheap after the run-up last year, the company has a much higher growth potential compared to most peers. Further, in the current uncertain environment, it makes sense to increase portfolio allocation to defensive industries like food.
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