Shares of B&G Foods (BGS -10.18%) were down 11.2% as of 2 p.m. ET on Wednesday after analysts at Piper Sandler downgraded the stock.
Citing an 11.5% quarterly decline in B&G’s U.S. retail sales according to data from retail-industry tracker SPINS/IRI (far below previous estimates for a 4.5% drop), Piper Sandler analysts lowered their rating on the leading consumer packaged-goods stock to underweight from neutral. The firm also reduced its per-share price target on B&G to $8 from $14, well below yesterday’s closing price of $9.48.
Piper Sandler added that B&G’s divestiture of its Back to Nature brand contributed a sales headwind of roughly 2 percentage points, and reduced Piper’s own projections for organic sales in the third quarter to fall 7.5%.
To make matters worse, Piper Sandler expects B&G’s earnings per share will come under pressure due to recent dilution and higher interest expenses. Indeed, just last week, the company closed on a previously announced $550 million private offering of 8% senior secured notes due in 2028. The offering effectively pushed back B&G’s previous obligation to repay a tranche of notes due in 2025, which had a lower 5.25% interest rate.
B&G Foods typically announces third-quarter results in early November. Most analysts, on average, are anticipating a 4.4% decline in revenue to $509.5 million and earnings of $0.25 per share (down from $0.31 a year earlier). But if the downgrade today is on point, those estimates might well prove to be optimistic when official results are disclosed.
Steve Symington has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.