Bridgford Foods Corp. :BRID-US: Earnings Analysis: Q1, 2017 By the Numbers : March 7, 2017

Bridgford Foods Corp. reports financial results for the quarter ended January 31, 2017.

We analyze the earnings along side the following peers of Bridgford Foods Corp. – J & J Snack Foods Corp. and Campbell Soup Company (JJSF-US and CPB-US) that have also reported for this period.

Highlights

  • Summary numbers: Revenues of USD 40.08 million, Net Earnings of USD 2.47 million.
  • Gross margins narrowed from 38.11% to 37.21% compared to the same period last year, operating (EBITDA) margins now 10.32% from 10.51%.
  • Year-on-year change in operating cash flow of -11.47% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings growth from operating margin improvements as well as one-time items.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2017-01-31 2016-10-31 2016-06-30 2016-04-30 2016-01-31
Relevant Numbers (Quarterly)
Revenues (mil) 40.08 42.87 29.89 31.15 36.16
Revenue Growth (%YOY) 10.86 0.75 12.85 16.67 4.16
Earnings (mil) 2.47 2.58 1.82 1.49 1.87
Earnings Growth (%YOY) 32.16 -76.33 -1.78 -32.24 300.86
Net Margin (%) 6.17 6.03 6.1 4.79 5.18
EPS 0.27 0.28 0.2 0.16 0.21
Return on Equity (%) 24.65 25.94 18.27 15.61 20.48
Return on Assets (%) 11.21 12.06 8.94 7.66 9.85

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Market Share Versus Profits

Revenues History
Earnings History

BRID-US‘s change in revenue this period compared to the same period last year of 10.86% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that BRID-US is holding onto its market share. Also, for comparison purposes, revenues changed by -6.51% and earnings by -4.26% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

The company’s earnings rose year-on-year. But this growth has not come as a result of improvement in gross margins or any cost control activities in its operations. Gross margins went from 37.21% to 38.11% for the same period last year, while operating margins (EBITDA margins) went from 10.32% to 10.51% over the same time frame.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

BRID-US‘s decline in gross margins has not produced any significant offsetting improvement in its working capital . This leads Capital Cube to conclude that the decline in gross margins are likely from operating issues and not trade-offs with the balance sheet. Working capital days are currently 83.37 days, compared to last year’s level of 70.15 days.

Gross Margin Versus Working Capital Days

Quadrant label definitions. Hover to know more

Customer Financed, Cash Starved, Supplier Financed, Cash Rich

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

BRID-US‘s change in operating cash flow of -11.47% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings

Margins

The company’s earnings growth has also been influenced by the following factors: (1) Improvements in operating (EBIT) margins from 8.58% to 8.61% and (2) one-time items. The company’s pretax margins are now 8.61% compared to 8.58% for the same period last year.

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

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Company Profile

Bridgford Foods Corp. engages in the manufacturing, marketing and distribution of frozen and snack food products throughout the United States. It operates through two business segments: Frozen Food Products and Snack Food Products. The Frozen Food Products segment manufactures and distributes food products, including biscuits, bread dough items, roll dough items and sandwiches. The Snack Food Products segment distribute both products manufactured by the company and products manufactured or processed by third parties. Bridgford Foods was founded by Hugh H. Bridgford in February 1932 and is headquartered in Anaheim, CA.

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