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Post Holdings (POST) Poised on Foodservice Rebound & Buyouts
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Recovery in the Foodservice channel is working favorably for Post Holdings, Inc. (POST - Free Report) . The consumer-packaged goods company benefits from its focus on acquisitions, helping it expand its customer base. That being said, Post Holdings is not immune to inflationary pressure and labor-related issues.
Let’s discuss further.
Image Source: Zacks Investment Research
What’s Working Well for Post Holdings?
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.
The company 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.
Will Hurdles be Countered?
The company’s second-quarter fiscal 2022 gross margin contracted from 30.3% to 26.8%. The downside can be attributed to higher raw material, freight and manufacturing costs. Apart from this, Post Holdings’ SG&A expenses increased 17% year over year to $235.4 million in the quarter.
We note that Post Holdings continues to battle supply-chain challenges in all segments due to labor shortages, input and freight inflation and other supply-chain hurdles, such as input availability. Per unit product costs have been rising while service and fill rates remain under normal levels. Also, inventories are low. While these factors are improving, they will likely persist throughout fiscal 2022. The Ukraine war has flared inflationary headwinds. Management expects certain energy and raw material expenses to remain high due to the conflict.
We believe the aforementioned upsides will likely help the Zacks Rank #3 (Hold) company keep its growth story going. POST’s stock has increased 15.2% in the past three months compared with the industry’s 0.3% growth.
Pilgrim’s Pride, which produces, processes, markets and distributes fresh, frozen and value-added chicken and pork products, sports a Zacks Rank #1 (Strong Buy). PPC has a trailing four-quarter earnings surprise of 31.4%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Pilgrim’s Pride’s current financial year earnings per share (EPS) suggests growth of almost 43% from the year-ago reported number.
Sysco, which engages in marketing and distributing various food and related products, sports a Zacks Rank #1. SYY has a trailing four-quarter earnings surprise of 9.1%, on average.
The Zacks Consensus Estimate for Sysco’s current financial year sales and EPS suggests growth of 32.6% and 124.3%, respectively, from the year-ago reported number.
Medifast, which manufactures and distributes weight loss, weight management, healthy living products and other consumable health and nutritional products, currently carries a Zacks Rank #2 (Buy). MED has a trailing four-quarter earnings surprise of 12.9%, on average.
The Zacks Consensus Estimate for Medifast’s current financial year sales and EPS suggests growth of almost 19% and 13.4%, respectively, from the year-ago reported figure.
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Post Holdings (POST) Poised on Foodservice Rebound & Buyouts
Recovery in the Foodservice channel is working favorably for Post Holdings, Inc. (POST - Free Report) . The consumer-packaged goods company benefits from its focus on acquisitions, helping it expand its customer base. That being said, Post Holdings is not immune to inflationary pressure and labor-related issues.
Let’s discuss further.
Image Source: Zacks Investment Research
What’s Working Well for Post Holdings?
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.
The company 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.
Will Hurdles be Countered?
The company’s second-quarter fiscal 2022 gross margin contracted from 30.3% to 26.8%. The downside can be attributed to higher raw material, freight and manufacturing costs. Apart from this, Post Holdings’ SG&A expenses increased 17% year over year to $235.4 million in the quarter.
We note that Post Holdings continues to battle supply-chain challenges in all segments due to labor shortages, input and freight inflation and other supply-chain hurdles, such as input availability. Per unit product costs have been rising while service and fill rates remain under normal levels. Also, inventories are low. While these factors are improving, they will likely persist throughout fiscal 2022. The Ukraine war has flared inflationary headwinds. Management expects certain energy and raw material expenses to remain high due to the conflict.
We believe the aforementioned upsides will likely help the Zacks Rank #3 (Hold) company keep its growth story going. POST’s stock has increased 15.2% in the past three months compared with the industry’s 0.3% growth.
3 Solid Food Stocks
Some better-ranked stocks are Pilgrim’s Pride (PPC - Free Report) , Sysco Corporation (SYY - Free Report) and Medifast (MED - Free Report) .
Pilgrim’s Pride, which produces, processes, markets and distributes fresh, frozen and value-added chicken and pork products, sports a Zacks Rank #1 (Strong Buy). PPC has a trailing four-quarter earnings surprise of 31.4%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Pilgrim’s Pride’s current financial year earnings per share (EPS) suggests growth of almost 43% from the year-ago reported number.
Sysco, which engages in marketing and distributing various food and related products, sports a Zacks Rank #1. SYY has a trailing four-quarter earnings surprise of 9.1%, on average.
The Zacks Consensus Estimate for Sysco’s current financial year sales and EPS suggests growth of 32.6% and 124.3%, respectively, from the year-ago reported number.
Medifast, which manufactures and distributes weight loss, weight management, healthy living products and other consumable health and nutritional products, currently carries a Zacks Rank #2 (Buy). MED has a trailing four-quarter earnings surprise of 12.9%, on average.
The Zacks Consensus Estimate for Medifast’s current financial year sales and EPS suggests growth of almost 19% and 13.4%, respectively, from the year-ago reported figure.