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B&G Foods Profit Leaps 86% On Pandemic Food Demand; Jefferies Sticks To Hold

B&G Foods (BGS) posted a better-than-estimated profit in the second quarter as consumers continued to cook and eat at home more than ever before during the coronavirus pandemic. Shares rose almost 5% to $28.91 on Friday.

Adjusted net income in the second quarter surged 86% to $46 million, or $0.71 per share year-on-year, beating analysts’ estimates by $0.11 per share. Net sales in the reported quarter jumped 38.1% to $512.5 million from a year ago but missed Street consensus by $2.75 million.

The company, which manufactures and distributes food products, including brands such as Green Giant, said the sales increase was mainly driven by strong food-at-home consumption due to the COVID-19 pandemic. Its products include frozen and shelf-stable vegetables, spices and meat-seasonings, breakfast foods, snacks, meal solutions and baking products.

“We had an outstanding second quarter in terms of net sales, net income, adjusted EBITDA and cash flow as our portfolio of brands served consumers very well as they continued to cook and eat more at home,” said B&G Foods CEO Kenneth G. Romanzi. “During the second half of the year, we remain focused on working closely with our supply chain partners to ensure that we can provide uninterrupted service and meet the increased demand resulting from the pandemic. At the same time, we look to turn some of this pandemic-related increase in demand into long-term growth opportunities for our brands.”

Looking ahead, B&G Foods said that July started off with a “bang” with 30% to 35% growth rates in net sales versus the same month last year based on preliminary results. However, when looking at June and July combined, net sales growth was about 20%, which is more akin to what the company is currently seeing in the consumption scanner data.

For 2020, management continues to believe that B&G Foods’ net sales and adjusted EBITDA for fiscal 2020 will materially exceed the guidance provided in February this year.

Following the 2Q results, Jefferies analyst Robert Dickerson raised the price target on the stock to $28 from $23, but maintained a Hold rating, saying that it remains to be seen how transitory or long-lasting the food-at-home consumption shift will be.

“With the at-home shift skyrocketing B&G’s revenue growth ahead of many publicly-traded food companies, EBITDA and FCF are also benefiting, thereby moving revisions up, lowering leverage, securing the dividend, and simply putting B&G in a better place than pre-pandemic,” Dickerson wrote in a note to investors. “Despite a still-attractive valuation, we’re treading carefully until we have incremental datapoints that support more normalized, yet sustained top line growth.”

Overall, the rest of the Street shares Dickerson’s cautious outlook. The Hold analyst consensus shows 7 Hold ratings versus 1 Buy rating. With shares up a staggering 61% year-to-date, the $27.33 average analyst price target implies 5.5% downside potential from current levels. (See BGS stock analysis on TipRanks)

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