Post's (NYSE:POST) Q4 Earnings Results: Revenue In Line With Expectations
Packaged foods company Post (NYSE:POST) reported results in line with analysts' expectations in Q4 FY2023, with revenue up 23.2% year on year to $1.95 billion. Turning to EPS, Post made a non-GAAP profit of $1.63 per share, improving from its profit of $0.85 per share in the same quarter last year.
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Post (POST) Q4 FY2023 Highlights:
Revenue: $1.95 billion vs analyst estimates of $1.94 billion (small beat)
EPS (non-GAAP): $1.63 vs analyst estimates of $1.38 (18.1% beat)
Free Cash Flow of $269.8 million, up 26.5% from the previous quarter
Gross Margin (GAAP): 28.3%, up from 24.9% in the same quarter last year
Sales Volumes were down 8.2% year on year
Founded in 1895, Post (NYSE:POST) is a packaged food company known for its namesake breakfast cereal as well as protein bars, shakes, and other healthier-for-you snacks.
Packaged Food
As America industrialized and moved away from an agricultural economy, people faced more demands on their time. Packaged foods emerged as a solution offering convenience to the evolving American family, whether it be canned goods, prepared meals, or snacks. Today, Americans seek brands that are high in quality, reliable, and reasonably priced. Furthermore, there's a growing emphasis on health-conscious and sustainable food options. Packaged food stocks are considered resilient investments. People always need to eat, so these companies can enjoy consistent demand as long as they stay on top of changing consumer preferences. The industry spans from multinational corporations to smaller specialized firms and is subject to food safety and labeling regulations.
Sales Growth
Post is one of the larger consumer staples companies and benefits from a well-known brand, giving it customer mindshare and influence over purchasing decisions.
As you can see below, the company's annualized revenue growth rate of 7.1% over the last three years was decent for a consumer staples business.
This quarter, Post's year-on-year revenue growth of 23.2% was excellent and in line with Wall Street's estimates. Looking ahead, analysts expect sales to grow 9.4% over the next 12 months.
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Volume Growth
Revenue growth can be broken down into changes in price and volume (the number of units sold). While both are important, volume is the lifeblood of a successful staples business as there’s a ceiling to what consumers will pay for everyday goods; they can always trade down to non-branded products if the branded versions are too expensive.
Post's average quarterly sales volumes have shrunk by 8.1% over the last two years. This decrease isn't ideal because the quantity demanded for consumer staples products is typically stable.
In Post's Q4 2023, sales volumes dropped 8.2% year on year. This result was a further deceleration from the 15% year-on-year decline it posted 12 months ago, showing the business is struggling to push its products.
Key Takeaways from Post's Q4 Results
With a market capitalization of $5.23 billion, Post is among smaller companies, but its $117.2 million cash balance and positive free cash flow over the last 12 months give us confidence that it has the resources needed to pursue a high-growth business strategy.
It was encouraging to see Post slightly top analysts' EPS expectations this quarter. That stood out as a positive in these results and was driven by net sales increases in Post Consumer Brands and Weetabix (attributable to price increases). On the other hand, its operating margin and adjusted EBITDA missed analysts' expectations and it continued to show declines in its sales volumes. Overall, this was a mixed quarter for Post. The stock is up 3.1% after reporting and currently trades at $88 per share.
Post may have had a tough quarter, but does that actually create an opportunity to invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.
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The author has no position in any of the stocks mentioned in this report.
