B&G Foods back in analyst's good graces

by Eric Schroeder
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B&G Foods brands - Bird's Eye vegetables, Green Giant
Credit Suisse raised its target price for B&G Foods, Inc. to $45 per share from $38.

NEW YORK — Citing an increased comfort level with management’s messaging, Credit Suisse on May 17 raised its target price for Parsippany, N.J.-based B&G Foods, Inc. to $45 per share from $38. After reaching its 52-week high of $44.43 per share on May 12, the company’s stock opened at $42.68 per share on the New York Stock Exchange on May 18. The 52-week low was $28.12 back on Aug. 12, 2015.

Robert Moskow, Credit Suisse
Robert Moskow, analyst with Credit Suisse

“Management gave a credible explanation for the factors that caused its tone on Green Giant to vacillate from optimistic to cautious then back to optimistic again, and we can see reason to believe that the new guidance may even turn out to be conservative if all goes according to plan,” Robert Moskow, an analyst with Credit Suisse, wrote in the May 17 research report. “Management’s plan to speedily launch a new Green Giant platform in August carries a fair degree of execution risk, but not enough to prevent us from bringing our valuation multiple closer to its historical relationship to the food group.”

In the report, Mr. Moskow delved into some of the changes at B&G Foods and their impact on the company’s issuance of guidance earlier this year. For example, the company said it believed it had a good chance of benefitting from overhead allocation at a Green Giant facility in Mexico once the seller finalized the split-up of the plant, but it was unable to factor in the impact on the bottom line when it gave earlier guidance. B&G Foods also experienced volatile shifts in distribution losses that clouded visibility, Mr. Moskow said.

Now, B&G Foods is excited about a new platform launch for Green Giant. The company just started selling the platform to customers with plans to begin shipping in August.

“This specific launch will not target the protein segment of the market that competitor Pinnacle has done so well under the Bird’s Eye brand, but Green Giant will enter the protein segment eventually,” Mr. Moskow wrote.

Mr. Moskow did caution that Credit Suisse could be wrong in its assessment of B&G Foods’ business, noting that the possibility of a price war represents a significant risk to the business.

“B&G has always been a rational competitor in the food industry, but we detected a high sense of urgency to regain the bagged vegetable distribution that Bird’s Eye lost to Pinnacle at Wal-Mart and other customers,” he said. “Getting those products back on shelf will require a high degree of trade spending, at least temporarily, because retailers need a reason to reverse their decision and Pinnacle won’t give up its distribution gains without a fight.”

For the first quarter ended April 2, B&G Foods net income was $33,196,000, equal to 56c per share on the common stock, up 70% from $19,567,000, or 36c per share, in the same period of the prior year. Adjusted net income advanced 88% to $38,616 million. Net sales increased 63% to $352,978,000 from $217,122,000.   
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