A Big Acquisition Is Hiding Big Risks at B&G Foods
When packaged food maker B&G Foods (NYSE: BGS) reported earnings for the first quarter of 2021, it said sales were up by a hefty 12.4% year over year. That's a pretty impressive showing. But there was an important caveat appended to that number, and it speaks to the very nature of this company's business model. It's also why investors need to be careful with this high-dividend-yielding food stock.
B&G Foods' 12.4% year-over-year first-quarter sales advance was helped along by its acquisition of Crisco in December 2020. The company's specific wording in its earnings release back in May was "driven by the Crisco acquisition and continued strong base business net sales." But if you take out Crisco, B&G sales were down 0.6%, "driven" by weakness in the company's Canadian business. There's a big difference between 12.4% and negative 0.6%. Indeed, when you look a bit deeper, the comment that the base business was "strong" is a little hard to swallow. To be fair, the company's U.S. sales were up 2.5%, but that doesn't change the weak overall sales performance when you remove the benefit of the Crisco purchase.
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Source Fool.com
