Post Holding Inc.'s shares jumped Monday after the cereal company said it plans to meet or beat its fiscal year guidance and announced plans for a $200 million debt offering.
THE SPARK: Post said Monday that its leadership expects the company will meet or slightly exceed its prior expectations of earnings before income, taxes, debt and amortization of $200 million to $210 million. The company also said it is planning a private debt offering of $200 million. Post said it plans to use the proceeds for general corporate purposes, which could include acquisitions or paying down debt.
THE BIG PICTURE: Ralcorp Holdings Inc. completed a spinoff of Post earlier this year so that it could focus on its private-label foods business. Post makes brand-name cereal such as Post Raisin Bran and Grape-Nuts.
Post's fiscal year ended Sept. 30 and the company is preparing its final results for public announcement.
Monday's news comes after Ralcorp said on Sept. 27 that it would exchange its remaining stake in the company for a settlement of approximately $200 million of debt.
THE ANALYSIS: Citi analyst John Malcolm reiterated his sell rating on the notes, saying the deal will increase the amount of debt the company carries. He also indicated that it is unclear if the company is setting itself up to make an acquisition or signaling that it is having some operational pressure and said the repurchase of the Ralcorp stake is a more pressing priority.
SHARE ACTION: Post's shares added 72 cents, or 2.3 percent, to close Monday trading at $31.91. Its shares have traded between $22.75 and $34.35 since the late January spinoff.