BGS has hit the arbitrary share price where I thought I would buy again (below $20). I've got a bid in now just below $19, which may easily get filled if we just get one more small downdraft today.
Lets see - BGS sells food! Has lots of debt, and pays a high dividend (about 9% yield now).
Recent trends at BGS are ........ inflation has hurt them, and price increases have been implemented, but have not yet hit their financial results - but those price increases should help in the current Q3.
"The second quarter was difficult. Similar to Q1, we experienced continued pressure from inflation ahead of recovering price actions. Total Q2 net sales increased 3.1% versus last year with adjusted EBITDA at $54.1 million, a 35.4% decline to prior year. Simply put our pricing actions have not yet caught up to the higher inflation flowing into our cost of goods sold. Within the quarter we saw improvement in June results after a tough April, May behind some early realizations from pricing implemented in June, and we expect to see further improvements starting in mid-July with additional pricing actions across the portfolio."
Energy prices hurt them, and hopefully that lessens going forward as energy prices have declined.
"The latest culprit is fuel and energy costs, which have driven up our freight transportation and utility costs rapidly. "
Q3 should improve over Q2, and Q4 should be sorta "back to normal".
"Looking forward we expect to return to last year adjusted EBITDA performance in the back half behind pricing catching up to costs. Specifically looking at the flow and timing of pricing against rising costs in 2022, first half pricing realization covered about 50% of actual year-over-year inflation. Q3 total pricing is projected to cover approximately 85% of year-over-year inflation and Q4 total pricing is projected to fully cover year-over-year inflation.
As a result, Q3 adjusted EBITDA is expected to be below last year with more pricing actions implemented against rising costs. And Q4 higher than last year with full pricing benefit against stabilized costs and service recovery compared to the Omicron and Delta challenges in Q4 2021."
Here's the near term investment thesis in a nutshell.
" Based on our June monthly performance, the execution of our pricing initiatives and some moderation in the level of commodity costs, we believe that we have seen the worst in terms of the margin compression in overall financial performance. We are cautiously optimistic with regards to the rest of the year."
and
"We did begin to see improvement in the month of June and expect to see margin recovery in the third and fourth quarters of this year. "
"We expect the fourth quarter to be an inflection point as pricing finally catches up to costs and after than any changes, we expect that to be the case through 2023. In fiscal 2023, we expect improved adjusted EBITDA performance in the first half of the year and full year adjusted EBITDA that better reflect levels that we saw in 2021. "
How about the dividend?
"Bruce Wacha
At the current time, there’s no change in dividend policy."
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Hmmm, so it sounds like their quarterly performance should improve somewhat in Q3, and quite a lot in Q4, and price increases kick in, the negative affects of the Q2 energy price surge fade, and things (perhaps) sorta normalize in 2023.
I don't know if $20 is the good entry point, or $18, or even $16, but I like this stock for the high dividend and the (hopefully) near term sequentially improving financial results. It seems like you can buy it today around $19 and by December 2023 it's perhaps back close to $30 and pays you 9% while you wait. |
