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Post Holdings (POST) Stock up 15% in 3 Months: Here's Why

·4 min read

Post Holdings, Inc. POST is well-positioned to boost portfolio strength, courtesy of strategic acquisitions. The consumer packaged goods company is benefiting from a recovery in the Foodservice channel. These upsides were seen in the company’s second-quarter fiscal 2022 results, with the top and the bottom line increasing year over year and beating the Zacks Consensus Estimate.

The Zacks Rank #2 (Buy) stock has increased 15.1% in the past three months against the industry’s 2.8% decline. The stock has comfortably outperformed the Zacks Consumer Staples sector’s 4.3% drop in the period.

Let’s discuss this further.

Zacks Investment Research
Zacks Investment Research

Image Source: Zacks Investment Research

Solid Q2 Performance

During the second quarter of fiscal 2022, POST’s adjusted earnings from continuing operations of 24 cents per share increased from 11 cents reported in the prior-year quarter. The company registered sales of $1,409.7 million, up 17.3%. The upside can be attributed to strength in Post Consumer Brands, Weetabix, Foodservice and Refrigerated Retail. Contributions from acquisitions and strategic pricing actions also drove quarterly sales. Post Consumer Brands’ sales increased 19.4% year over year to $573.1 million, while segmental volumes rose 19.8%. Sales in the Weetabix segment rose 3.2% to $117 million. Refrigerated Retail sales were $267.6 million, up 1.7%.

Foodservice Business Aids Growth

Post Holdings is benefiting from a recovery in the Foodservice business. During the second quarter of fiscal 2022, Foodservice sales increased 22.4% to $451.9 million. Volumes rose 10.9% due to the increased away-from-home egg and potato demand and potato distribution gains. Management highlighted that volumes in certain channels and product categories in the foodservice business have almost recovered to pre-pandemic levels. In aggregate, overall foodservice volumes are still below pre-pandemic levels. That being said, management expects the foodservice business to return to pre-pandemic profitability in fiscal 2023.

Expansion Efforts on Track

Post Holdings strategically increased its presence through acquisitions. During the second quarter of fiscal 2022, Post Holdings’ top line included $102.1 million in net sales from acquisitions. These acquisitions include the Private label ready-to-eat (PL RTE) cereal business, the Egg Beaters liquid egg brand, the Almark Foods business and related assets and the Peter Pan nut butter brand. On Apr 5, 2022, Post Holdings acquired Lacka Foods Limited. Lacka Foods is a U.K.-based marketer of high protein, ready-to-drink (RTD) shakes under the UFIT brand. Post Holdings acquired Almark Foods (or Almark) on Feb 1, 2021. Almark, renowned for its hard-cooked and deviled egg products, provides conventional, organic and cage-free products. On Jan 25, Post Holdings acquired the Peter Pan peanut butter brand. The Peter Pan peanut butter is one of the leading brands that cater to a diversified customer base in key channels.

Apart from this, Post Holdings recently unveiled that its Consumer Brands business will invest up to $110 million to expand cereal production capacity at its Sparks, NV facility. The envisioned expansion will give Post Consumer Brands increased production volume to counter capacity constraints and meet consumer demand efficiently. The move will help the company lower transportation costs to cater to West Coast customers.

We believe that such well-chalked expansion endeavors and the aforementioned upsides will likely help POST stay in investors’ good books.

Top 3 Food Bets

Some better-ranked stocks are Sysco Corporation SYY, United Natural Foods UNFI and Campbell Soup CPB.

Sysco, which markets and distributes various food and related products, sports a Zacks Rank #1 (Strong Buy). SYY has a trailing four-quarter earnings surprise of 9.1%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Sysco’s current financial year sales and earnings per share (EPS) suggests growth of 32.5% and 124.3%, respectively, from the year-ago reported number.

United Natural Foods distributes natural, organic, specialty, produce and conventional grocery and non-food products. UNFI currently sports a Zacks Rank #1.

The Zacks Consensus Estimate for UNFI’s current financial year sales and EPS suggests growth of 7.2% and 3.6%, respectively, from the year-ago period’s reported figures. United Natural Foods has a trailing four-quarter earnings surprise of 29.9%, on average.

Campbell Soup, which manufactures and markets food and beverage products, currently carries a Zacks Rank #2. Campbell Soup has a trailing four-quarter earnings surprise of 10.8%, on average.

The Zacks Consensus Estimate for CPB’s current financialyear sales suggests growth of 0.5% from the year-ago reported figure.

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