What Happened?
Shares of packaged foods company B&G Foods (NYSE: BGS) fell 1.9% in the afternoon session after a peer in the packaged foods industry, Hormel Foods, issued a disappointing profit outlook.
Hormel Foods saw its stock decline after lowering its full-year earnings guidance, citing unexpected inflation in commodity costs. While Hormel reported strong sales, the rising costs are squeezing its profit margins, creating a negative ripple effect across the sector. Investors are likely concerned that B&G Foods could face similar profitability pressures due to these industry-wide cost challenges. The market's reaction suggests worries about potential margin compression for other food producers as a result of the inflationary environment.
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What Is The Market Telling Us
B&G Foods’s shares are quite volatile and have had 17 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 14 days ago when the stock dropped 4.1% on the news that markets pulled back amid hotter-than-expected inflation data. The main concern for investors was the July Producer Price Index (PPI), a measure of wholesale inflation. The higher-than-expected reading suggests that companies could face squeezed profit margins due to rising costs. This also reduces the likelihood of the Federal Reserve cutting interest rates, which could further dampen economic activity. Compounding these inflation fears are multiple reports signaling a weakening consumer.
B&G Foods is down 37.2% since the beginning of the year, and at $4.48 per share, it is trading 52.1% below its 52-week high of $9.34 from September 2024. Investors who bought $1,000 worth of B&G Foods’s shares 5 years ago would now be looking at an investment worth $142.76.
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