Piper Sandler cuts B&G Foods to Underweight as measured sales continue to drop

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Piper Sandler cuts B&G Foods to Underweight as measured sales continue to drop
Credit: © Reuters.

Piper Sandler downgraded B&G Foods, Inc. (NYSE: BGS ) to an Underweight rating (from Neutral) and cut their 12-month price target to $8.00 (from $14.00) as measured retail sales trends continue to decline.

According to SPINS/IRI data, B&G's measured retail sales in the US dropped by 11.5% in the 3Q. This decline was much steeper than previous projections of a 4.5% decrease in organic sales.

Additionally, Piper Sandler believes the divestiture of Back to Nature contributed to a 2.0 percentage point headwind.

Piper Sandler’s new estimate for BGS’ organic revenue decline in the third quarter of 2023 is now -7.5%. However, this estimate might still be on the optimistic side, given that B&G exceeded retail sales declines by approximately 5% in 1Q23 and around 7% in 2Q23.

Piper Sandler analysts wrote in a note that they “recognize risk from trade inventory de-loading, as its volume declines could drive resets to retailer inventories and potentially shelf space allocations.”

“It also faces EPS dilution from higher interest expense and share count dilution,” added the analysts.

Piper Sandler lowered 2023 EPS estimates from $1.05 to $0.94 and 2024 EPS estimates from $1.10 to $0.80.

Shares of BGS are down 5.8% in pre-market trading Wednesday morning.

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