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Shares in B&G Foods are down over 14% YTD after the company missed analyst estimates and reduced guidance.

High aquisition costs reduced EPS in the most recent fiscal quarter. However, revenue growth is very impressive.

The 4.67% dividend is high, but not unsustainable.

Shares in B&G Foods (NYSE:BGS) are down 14.16% year to date. The most recent quarterly report was quite disappointing. EPS for Q2 2014 was only $0.33, compared to analyst estimates of $0.39. Furthermore, the company reduced its full year guidance to a range of $1.54 to $1.60. This has pushed the price per share down significantly. Shares are now trading at $29.12, only slightly above the 52 week low of $27.35.

BGS Revenue (Quarterly) data by YCharts

Second quarter revenues were up 26.1% compared to the same quarter last year. The company has recently acquired a number of brands, which have added to revenues.


Date acquired

Added to revenue in Q2 2014

Pirate Brands

July 2013

$20.3 million

Specialty Brands

April 2013

$11.5 million

Rickland Orchards

October 2013

$7.1 million

Truenorth Brand

May 2013

$1.4 million

Sales for the company's base business were also up. A 2.8% unit volume increase was partially offset by a 1.7% net price decrease. The lower than expected EPS is a result of a large increase in selling, general and administrative expenses, mostly due to acquisition-related transaction costs.

Revenues in the most recent 12 months were $793 million, giving the company a price to sales ratio of 2.0 at the current market cap of $1.57 billion. However, analysts expect the company to have net sales of $859 million in the current fiscal year, putting the forward p/s ratio at only 1.8. The 5-year average p/s ratio is also 1.8 and while the industry average is a bit lower at 1.5, I believe the strong expected growth can justify a premium p/s ratio.

BGS EPS Diluted (Annual) data by YCharts

Looking at the earnings per share, we can see BGS had EPS of $0.98 in the most recent fiscal year. For the current fiscal year, which ends in December, the company expects to have earnings per share in the range of $1.54 to $1.60. Analysts appear to agree with an average estimate of $1.56. At the current price per share of $29.12, this means BGS' forward p/e ratio is between 18.2 and 18.9, which is well below both the industry average of 20.7 and the company's 5-year average p/e ratio of 24.6. For next year, analysts expect to see a significant increase in EPS, with the average estimate standing at $1.74.

BGS Payout Ratio (NYSE:TTM) data by YCharts

BGS pays a quarterly dividend of $0.34 per share, which is $1.36 annually, for a dividend yield of 4.67%. At first glance, the payout ratio may appear unsustainably high, but EPS growth should bring this down quite a bit in the next few years. I wouldn't expect large dividend increases, if any, in the years to come, but a dividend yield of 4.67% means investors will get paid to wait.

BGS Total Long Term Debt (Quarterly) data by YCharts

One thing that may worry some investors is the long-term debt, which has recently reached a level of $1.05 billion. Net interest expense in the most recent quarter was $11.8 million, or 5.8% of net sales. However, I don't consider a rising long-term debt as a problem, so long as the company manages to invest this money wisely.


Shares in BGS took a dive when the company recently reduced its guidance and are still trading near 52 week lows. The company has taken on quite a bit of long-term debt, which it has used to purchase a number of brands. The lower-than-expected earnings per share are a result of high acquisition costs, and even with the lower guidance, the company is still trading at a lower p/e that's lower than both the industry average and the company's own 5-year average. Looking at the historical payout ratios, you might think BGS' dividend is unsustainable. However, high expected EPS growth should lower the payout ratio in the next few years. I believe the current price per share represents a great entry point.