November 30, 2023

Post Holdings (POST) Gains on Solid BellRing Brands & Buyouts

Post Holdings, Inc. POST is benefiting from its focus on acquisitions, helping it expand the customer base. The company is also seeing a recovery in the Foodservice channel. In addition, growth across the BellRing Brands segment is contributing to its performance. That said, pandemic-led hurdles like supply chain disruption are a headwind.

 Let’s take a closer look.

Zacks Investment ResearchImage Source: Zacks Investment Research

Lucrative Acquisitions: A Key Driver

Post Holdings has strategically increased its presence through acquisitions. During the fourth quarter of fiscal 2021, the company’s top line included $99.8 million in net sales from acquisitions made in fiscal 2021. The buyouts include Private label ready-to-eat (PL RTE) cereal business, Egg Beaters liquid egg brand, Almark Foods business and related assets and Peter Pan nut butter 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. The products are distributed widely to retail outlets and foodservice distributors. On Jan 25, Post Holdings acquired Conagra Brands’ Peter Pan peanut butter brand. Peter Pan peanut butter is one of the leading brands that cater to a diversified customer base in key channels. On Jul 1, 2020, the company completed the acquisition of Henningsen Foods, Inc., which now forms part of the company’s Foodservice segment. In June 2021, the company completed the acquisition of PL RTE Cereal Business of TreeHouse Foods, Inc.

Foodservice Witnesses Strong Growth

Post Holdings’ top-line increase during fourth-quarter fiscal 2021 was supported by growth in the company’s Foodservice unit. Sales in the foodservice unit increased 42.5% to $456.8 million, including benefits of $13.1 million from the Almark acquisitions. Volumes increased 23.1%, including 180 basis points (bps) benefit from the Almark buyout. The upside in volumes can be attributed to significantly higher away-from-home demand. Egg volumes rose 21.1% (including a 230 bps benefit from Almark), while potato volumes jumped 34.3% in the particular unit. Segmental profit was $14.2 million, up from the year-ago quarter’s levels. Management is optimistic about the ongoing volume demand recovery in the Foodservice unit. The company expects foodservice volumes to return to pre-pandemic profitability in fiscal 2023.

BellRing Brands Drives Growth

Post Holdings’ BellRing Brands segment has been gaining from positive customer response across the Premier Protein and Dymatize banners. During fourth-quarter fiscal 2021, sales in the BellRing segment amounted to $340 million, up 20.3% year over year. The Premier Protein brand’s sales gained from the RTD (ready-to-drink) shake distribution in existing and new products, strong velocities as well as higher average net selling prices. Sales in the Dymatize brand increased 41.3% year on year and the same for all other products increased 7.6%. The continued growth of BellRings Brands, backed by well-chalked investments, is likely to keep driving the top line in the future. Management plans to incur capital expenditures of approximately $4 million during fiscal 2022 for BellRing.

Wrapping Up

Post Holdings continues to monitor the impact of the COVID-19 pandemic upon its business operations. The company has been facing challenges related to labor shortages, input and freight inflation as well as other supply chain disruptions, like input availability. These headwinds are exerting pressure on the company’s supply chains across all segments, affecting sales and increasing manufacturing costs, primarily in foodservice and refrigerated retail.

That being said, the aforementioned upsides are likely to help the Zacks Rank #3 (Hold) company sustain growth. The company’s stock has increased 5.7% in the past six months against the industry’s decline of 0.8%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Hot Consumer Staples Bets

Some better-ranked stocks are Flower Foods FLO, United Natural Foods UNFI and Medifast MED.

Flower Foods, the producer of packaged bakery foods in the United States, currently sports a Zacks Rank #1. Shares of FLO have increased 16.4% in the past six months.

The Zacks Consensus Estimate for Flower Foods’ 2022 sales suggests growth of 1.9% from the year-ago reported figure. FLO has a trailing four-quarter earnings surprise of 15.4%, on average.

United Natural Foods, the leading distributor of natural, organic and specialty food and non-food products in the United States and Canada, carries a Zacks Rank #2 (Buy) at present. Shares of UNFI have moved up 33.4% in the past six months.

The Zacks Consensus Estimate for United Natural Foods’ current financialyear earnings per share suggests growth of 7.7% from the year-ago reported number. UNFI has a trailing four-quarter earnings surprise of 35.4%, on average.

Medifast, the manufacturer of healthy living and other consumable health and nutritional products, currently carries a Zacks Rank of 2. Shares of MED have lost 26.6% in the past six months.

The Zacks Consensus Estimate for Medifast’s 2022 sales suggests growth of 10% from the year-ago reported figure. MED has a trailing four-quarter earnings surprise of 17.3%, on average.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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