Yahoo Finance Post Holdings (POST) Banks on Foodservice Business for Growth
Post Holdings, Inc. POST 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 bottom lines increasing year over year and beating the Zacks Consensus Estimate. The consumer-packaged-goods company is also increasing its presence through acquisitions to enhance its portfolio.
Foodservice Business: Key Factor
Post Holdings is benefiting from strength in the Foodservice business. During the first quarter of fiscal 2023, Foodservice sales increased 36.9% to $600.5 million. Revenues reflect the effects of inflation-driven pricing actions, the impact of commodity cost pass-through pricing model and avian influenza-driven pricing efforts. Volumes rose 4.4%.
Segmental adjusted EBITDA was $109 million, up 163.9% driven by better average net pricing and volume growth. Prior to this, sales in the Foodservice segment increased 36.9%, 33.1% and 22.4% in the fourth, third and second quarters, respectively. Management highlighted that its Foodservice business has completely recovered from COVID and turned profitable.
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Other Factors Driving Growth
Post Holdings has been focusing on acquisitions, helping it expand its customer base. 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. On Apr 5, 2022, Post Holdings acquired Lacka Foods Limited. Lacka Foods is a UK-based marketer of high-protein and ready-to-drink shakes under the UFIT brand.
POST acquired Almark Foods (or Almark) on Feb 1, 2021. Almark, which is renowned for its hard-cooked and deviled egg products, provides conventional, organic and cage-free products. In June 2021, the company stated that it had completed the acquisition of the PL RTE Cereal Business of TreeHouse Foods.
On Jan 25, 2021, Post Holdings acquired the Peter Pan peanut butter brand. On Jul 1, 2020, the company completed the acquisition of Henningsen Foods, Inc., which forms part of its Foodservice segment.
Post Holdings reported robust first-quarter fiscal 2023 results wherein adjusted earnings from continuing operations of $1.08 per share increased from 29 cents reported in the prior-year quarter. POST registered sales of $1,566.3 million, up 17.1% from the year-ago period. This 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 segments.
Wrapping Up
Post Holdings has been experiencing rising selling, general and administrative costs for some time. The company also faces a lot of challenges from supply chain disruptions. Management noted that supply chain disruptions eased slightly but continued to drive up manufacturing costs in its first-quarter fiscal 2023, while customer order fulfilment rates remained below optimum levels. POST also experienced higher input and freight inflation during the aforementioned period.
Nonetheless, the benefits mentioned above will most likely assist Post Holdings in overcoming such obstacles.
Shares of this Zacks Rank #3 (Hold) company have declined 5.1% in the past three months compared with the industry’s fall of 1.3%.
3 Key Picks
Some top-ranked stocks are Inter Parfums IPAR, General Mills GIS and KimberlyClark KMB
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 (Strong Buy). 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 and earnings suggests growth of 10.5% and 0.8%, respectively, from the year-ago reported numbers.
General Mills is a major designer, marketer and distributor of premium lifestyle products. It currently carries a Zacks Rank of 2 (Buy). GIS has a trailing four-quarter earnings surprise of 8.1%, on average.
The Zacks Consensus Estimate for General Mills’ current financial year sales and earnings suggests growth of 6.3% and 7.4%, respectively, from the year-ago reported numbers.
KimberlyClark is engaged in the manufacture and marketing of a wide range of consumer products around the world. It currently has a Zacks Rank of 2. KMB has a trailing four-quarter earnings surprise of 1.4%, on average.
The Zacks Consensus Estimate for KimberlyClark’s current financial year sales and earnings suggests growth of 1.7% and 5.2%, respectively, from the year-ago reported numbers.
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