Here's Why Post Holdings (POST) is a Solid Food Industry Bet

·3-min read

Post Holdings, Inc. POST is increasing its presence through acquisitions to enhance its portfolio. The consumer-packaged-goods company is benefiting from strategic pricing actions and strong performance across Foodservice business. These upsides were seen in its first-quarter fiscal 2023 results with the top and the bottom line increasing year over year and beating the Zacks Consensus Estimate.

Let’s delve deeper.

Promising Q1 Performance

In the first quarter of fiscal 2023, Post Holdings posted adjusted earnings from continuing operations of $1.08 per share, increasing from 29 cents reported in the prior-year quarter. POST registered sales of $1,566.3 million, up 17.1%. The upside can be attributed to pricing actions in every segment and ongoing volume recovery across Foodservice business. The company saw sales growth in the Post Consumer Brands, Refrigerated retail and Foodservice segment.

We note that Post Holdings has been gaining strength from the Foodservice business for a while. During the fiscal first quarter, Foodservice sales increased 36.9% to $600.5 million.
The Foodservice sales increased 36.9% and 33.1% in the fourth quarter and the third quarter of fiscal 2022 respectively on a year-over-year basis.

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Prudent Acquisitions Aid Growth

Post Holdings has been focusing on acquisitions, helping it expand its customer base. Recently, on Feb 8, 2023, Post Holdings acquired select pet food brand from The J.M. Smucker Co. This acquisition will help the company access entry point into the attractive and growing pet food categories.

Last year in April, Post Holdings acquired Lacka Foods Limited. Lacka Foods is a UK-based marketer of high-protein, ready-to-drink shakes under the UFIT brand.

In Feb 2021, Post Holdings acquired Almark Foods (or Almark). Almark is known for its hard-cooked and deviled egg products and provides conventional, organic and cage-free products. Other major buyouts include, PL RTE Cereal Business of TreeHouse Foods, Peter Pan peanut butter brand and Henningsen Foods, Inc., which forms part of its Foodservice segment.

Wrapping Up

Shares of this Zacks Rank #1 (Strong Buy) company have declined 5.8% in the past three months compared with the industry’s fall of 8.2%. Although shares of Post Holdings have slid in the aforementioned period, this provides a good entry point given the stock’s attractive valuation, sound fundamentals and strategic initiatives. The stock currently has a Value Score of B.

3 Solid Picks

Some other top-ranked stocks are Inter Parfums IPAR, The Kroger Co. KR and Deckers Outdoor Corporation DECK.

 IPAR has an expected long-term earnings growth rate of 15% and a trailing four-quarter earnings surprise of 36.2%, on average. Inter Parfums currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Inter Parfums’ current financial year sales suggests growth of 10.8% from the year-ago reported numbers.

The Kroger Co. operates in the thin-margin grocery industry, currently sports a Zacks Rank of 2 (Buy). KR has a trailing four-quarter earnings surprise of 9.8%, on average.

The Zacks Consensus Estimate for Kroger’s current financial year sales and earnings suggests growth of 2.5% and 6.2%, respectively, from the prior-year reported numbers.

Deckers Outdoor Corporation is a leading designer, producer and brand manager of innovative, niche footwear, currently sports a Zacks Rank of 2. DECK has a trailing four-quarter earnings surprise of 31%, on average.

The Zacks Consensus Estimate for Deckers’ current financial year sales and earnings suggests growth of 12.2% and 13.6%, respectively, from the corresponding year-ago reported figures.

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