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Post Holdings (POST) Q2 Earnings Lag Estimates, Sales Rise

Zacks Equity Research
·5 min read

Post Holdings, Inc. POST reported second-quarter fiscal 2020 results, wherein earnings declined year over year and missed the Zacks Consensus Estimate. Nonetheless, sales were strong – rising year over year and beating the consensus mark.

The company has witnessed an increase in demand for its products, which are sold online as well as through food, drug, mass, thanks to the coronavirus outbreak-led stockpiling and higher at-home consumption. However, Post Holdings’ foodservice business has been adversely impacted by reduced demand from full service restaurants, quick service restaurants, education, and travel and lodging amid the pandemic.

To maintain financial flexibility amid the pandemic, the company has drawn down $500.0 million from its revolving credit facility on Mar 23, 2020. Nevertheless, on May 5, management repaid $150.0 million of the outstanding principal amount on its revolving credit facility. Apart from this, due to uncertainties related to the coronavirus outbreak, management withdrew its fiscal 2020 adjusted EBITDA and capital expenditure view, which was previously provided on Feb 6, 2020.

Post Holdings Inc Price, Consensus and EPS Surprise


Post Holdings Inc Price, Consensus and EPS Surprise
Post Holdings Inc Price, Consensus and EPS Surprise

Post Holdings Inc price-consensus-eps-surprise-chart | Post Holdings Inc Quote

Q2 in Detail

Adjusted earnings were 65 cents per share, missing the Zacks Consensus Estimate of 91 cents in the fiscal second quarter. Also, the metric is lower than adjusted earnings of $1.31 per share reported in the year-ago period.

The company registered sales of $1,494.2 million, reflecting a rise of 7.7% from $1,387.8 million in the prior-year quarter. Moreover, the figure surpassed the consensus mark of 1,413 million.

Further, gross profit of $438.8 million declined 2.8%, whereas the gross margin contracted 310 basis points (bps) to 29.4% in the quarter under review.

Meanwhile, the company witnessed SG&A expenses of $245 million, up 8.5% from $225.8 in the year-ago quarter. SG&A expenses, as a percentage of sales, expanded 10 bps to 16.4% in the reported quarter.

Post Holdings generated operating profit of $153.5 million in the reported quarter. This depicts a decline of 17.6% from $186.3 million in the year-ago quarter.

Adjusted EBITDA declined 2.4% to $291.7 million from $298.9 million in the prior-year quarter.

Segment Details

Post Consumer Brands
: Sales in the segment increased 10.6% year over year to $507.9 million in the quarter. Volumes increased 14.2%. Segmental profit was $92.4 million, marking a increase of 11.1% from the prior-year period.

Weetabix: Segmental sales increased 8.9% to $113.4 million in the reported quarter. Volumes grew to the tune of 6%. Segmental profit of $28 million increased 18.6% year over year.

Foodservice: Sales declined 2.7% to $378.4 million in the quarter under review. Segmental profit was $23.8 million, reflecting year-over-year decline of 49.8%.

Refrigerated Retail: Sales in the segment were $237.6 million, which increased 8.2% from the year-ago quarter. Segmental profit of $30.2 million improved 14% year over year.

BellRing Brands: Sales of $257.5 million rose 18.9% mainly due to strength in its Premier Protein brand. Premier Protein brand grew on the back of higher purchases, owing to the coronavirus outbreak-led pantry loading along with increased promotional activity. However, segmental profit of $35.1 million decreased 20.2% due to increased marketing and advertising costs along with increased public company expenses.

Financial Details

The company concluded the quarter with cash and cash equivalents of $1,179.4 million, long-term debt of $7,171.3 million, and shareholders’ equity of $2,865.2 million.

Cash provided by operating activities was $89 million at the end of six months ended Mar 31, 2020. Further, the company approved a new share repurchase program of $400 million on Dec 6, 2019, for two years. During the quarter under review, Post Holdings bought back 2 million shares worth $206.0 million. Following this, it had $161.9 million remaining under its share-repurchase plan at the end of the fiscal second quarter.

Price Performance

Notably, shares of this Zacks Rank #3 (Hold) company have lost17.9% in the past three months compared with the industry’s decline of 11.2%.


Some Solid Food Stocks

General Mills GIS currently has a long-term earnings growth rate of 7.5% and a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Campbell Soup Company CPB presently has a long-term earnings growth rate of 7.2% and a Zacks Rank #2.

Conagra Brands CAG currently has a long-term earnings growth rate of 7% and a Zacks Rank #2.

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