Post Holdings (POST) is Poised on Pricing Strategy, Acquisitions
Post Holdings, Inc. POST is benefiting from pricing actions across the business to counter input and freight cost inflation. Pricing aided the company's third-quarter fiscal 2023 results, with the top and bottom lines increasing year over year and beating the Zacks Consensus Estimate.
During the quarter, the company saw sales growth in the Post Consumer Brands, Weetabix and Foodservice segments. This consumer-packaged goods company is also making expansions through acquisitions to diversify its business.
One significant acquisition was the completion of the purchase of select pet food brands from The J.M. Smucker Co. on Apr 28, 2023. This acquisition is expected to further diversify Post Holdings' product portfolio and provide new avenues for growth in the dynamic pet food industry.
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Strength Across Segments
Post Holdings reported robust third-quarter fiscal 2023 results, wherein adjusted earnings from continuing operations of $1.52 per share increased significantly from the 69 cents reported in the prior-year quarter. POST registered sales of $1,859.4 million, up 21.9% year over year. The upside can be attributed to pricing actions in every segment.
The company is experiencing substantial growth, particularly fueled by the impressive performance of its Post Consumer Brands segment. In the third quarter of fiscal 2023, this segment achieved remarkable sales growth, soaring 51.6% to reach $871.3 million. This impressive increase includes gains attributed to its Pet Food division.
Additionally, Post Holdings has been receiving a significant boost from its Foodservice business. In the third quarter of fiscal 2023, segmental sales for Foodservice advanced 7.5% year over year, reaching $622.7 million.
This growth was driven by a 3.0% year-over-year increase in volumes, largely attributed to the rising demand for away-from-home egg and potato products. Potato volumes witnessed a substantial 6.8% increase, whereas egg volumes rose 2.3%. Also, the Weetabix segment’s sales moved up 7.4% year over year to $134.2 million in the quarter.
High SG&A Costs
Post Holdings has been seeing a rise in SG&A costs for a while. The company’s SG&A expenses increased 33.7% year over year to $300.9 million in the third quarter of fiscal 2023. SG&A expenses as a percentage of sales were 16.2%, up from the 14.8% reported in the year-ago quarter. The persistence of the trend is concerning for the company.
Share Price Movement & Estimates
Shares of this Zacks Rank #3 (Hold) company have gained 3.8% in the past three months against the industry’s decline of 7.7%.
The Zacks Consensus Estimate for the current and next fiscal year has increased about 20% and 6.3% to $4.86 and $5.05, respectively, over the past 30 days.
Stocks to Consider
Some better-ranked stocks are J&J Snack Foods Corporation JJSF, Grocery Outlet Holding Corp. GO and Flowers Foods FLO.
J&J Snack Foods is an American manufacturer, marketer and distributor of branded niche snack foods and frozen beverages for the food service and retail supermarket industries. It currently sports a Zacks Rank #1(Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for J&J Snack Foods’ current fiscal-year sales and earnings suggests growth of 11.1% and 62.3% from the year-ago period’s actuals. JJSF has a trailing four-quarter earnings surprise of 4.7%, on average.
Grocery Outlet is a high-growth, extreme-value retailer of quality, name-brand consumables and fresh products. It currently carries a Zacks Rank #2 (Buy). The expected EPS growth rate for three to five years is 12.2%.
The Zacks Consensus Estimate for Grocery Outlet’s current financial-year sales and earnings suggests growth of 11.2% and 3.9% from the year-ago period’s actuals. GO has a trailing four-quarter earnings surprise of 14.3%, on average.
Flowers Foods emphasizes providing high-quality baked items. The company currently carries a Zacks Rank #2. The expected EPS growth rate for three to five years is 2.3%.
The Zacks Consensus Estimate for Flowers Foods’ current financial-year sales suggests growth of 6.7% from the year-ago period’s actuals. FLO has a trailing four-quarter earnings surprise of 7.6%, on average.
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