B&G Foods, Inc. (NYSE:BGS) is a packaged and processed foods company with a number of brands and an impressive range of food products. Its strategy of growing through acquisitions has always helped it in increasing its customer base in its various markets in the U.S., Canada and Puerto Rico.
A look at the company’s product portfolio reveals over 30 established brands like Mrs Dash, Cream Of Wheat, Ortega, New York Style, Old London, and other products from various retail stores spread across different countries. It is also engaged in sales and distribution of household products primarily used for cleaning solutions such as “Static Guard” and “Kleen Guard.”
So the company has a diversified portfolio, and a look at its recent results will show us that it has been putting that diversity to good use.
Looking at the numbers
Its revenue in its recent quarter amounted to $160.9 million, courtesy of the gamut of products in its portfolio. This was a considerable growth of 8.3% from last year’s second quarter. A few acquisitions since then also had a positive impact on revenue growth.
As compared to the first two quarters of fiscal 2012, we further notice a growth of 8.5% in revenue in the six months this year to $332.1 million against $306 million last year. EPS was reported as $0.33 per share, missing the analyst estimate of $0.35 per share.
The policy that drives growth
Using the wheel is always more sensible than creating a wheel. So it is not surprising that B&G Foods, Inc. (NYSE:BGS) eyes various small brands and buys them to keep growth intact. Investments made by the company in such brands should help it generate cash and ensure a sustained dividend in the long run.
In July, B&G Foods, Inc. (NYSE:BGS) completed the acquisition of Robert’s American Gourmet Food, otherwise known as Pirate Brands. This acquisition will again increase the number of products the company sells by adding natural snacks like Pirate’s Booty, Smart Puffs and Original Tings brands apart from other products. This acquisition is expected to contribute to B&G’s earnings and cash flow immediately.
In the past, B&G Foods, Inc. (NYSE:BGS) has regularly acquired various brands such as Truenorth in May. In October 2012, it acquired New York Style Bagel Crisps and Old London. TrueNorth contributed $3.2 million to revenue in the latest quarter while New York Style and Old London brands contributed $10.9 million. So we see that the company has a good track record of buying out smaller players, and then integrating them into its business well. I believe that the latest acquisition of Pirate Brands for $195 million will also lead to more revenue growth in the future.
A good dividend
A good dividend is always welcome, and B&G Foods, Inc. (NYSE:BGS) has a good track record of paying dividends. On July 25, the company announced a 10.3% increase in quarterly dividend to $0.32 per share for an annual dividend yield of 3.6%. This was the 36th consecutive quarterly dividend announced by the company’s board, ever since it went public in October 2004. This is another good reason to hold shares of the company.
Fighting with the big fish
General Mills, Inc. (NYSE:GIS), one of the top ten producers in the world of packaged foods and among the top five in the U.S., might give strong competition to B&G Foods. The company has a huge marketing budget with its prime focus on TV advertisement, amounting to $835 million in 2012. It also plans to launch around 200 new food products in 2013. General Mills, Inc. (NYSE:GIS) is huge with a market capitalization of $33 billion and commands great financial muscle to outwit the likes of B&G Foods, Inc. (NYSE:BGS). It had revenue of almost $18 billion in the previous fiscal year, so it can afford to spend big on marketing.