Post Holdings, Inc. (POST) is shutting down two of its cereal manufacturing plants — one in Cobourg, Ontario, and the other in Sparks, Nevada — by the end of 2025. This strategic decision comes as the demand for ready-to-eat cereal continues to decline, prompting the company to cut excess production capacity and streamline operations. The closures may impact roughly 300 employees.Post Holdings plans to transfer production to other facilities within its Post Consumer Brands network. The move is aimed at impr ...

Core Insights - The article emphasizes the investment philosophy focused on small cap companies, highlighting the importance of identifying mispriced securities through understanding financial drivers and utilizing DCF model valuation [1]. Group 1 - The investment strategy is not confined to traditional categories such as value, dividend, or growth investing, but rather considers all prospects of a stock to assess risk-to-reward [1].

Core Insights - Zacks Premium provides tools for investors to enhance their stock market engagement and confidence [1][2] Zacks Style Scores - Zacks Style Scores are indicators that rate stocks based on value, growth, and momentum methodologies, helping investors identify stocks likely to outperform the market in the next 30 days [3][4] - Each stock is rated from A to F, with A indicating the highest potential for outperformance [4] Value Score - The Value Score identifies attractive and discounted stocks using ratios like P/E, PEG, Price/Sales, and Price/Cash Flow [4] Growth Score - The Growth Score focuses on a stock's future prospects and financial health, analyzing projected and historical earnings, sales, and cash flow [5] Momentum Score - The Momentum Score helps investors capitalize on price trends, using factors like one-week price change and monthly earnings estimate changes [6] VGM Score - The VGM Score combines the three Style Scores to identify stocks with the best value, growth, and momentum characteristics [7] Zacks Rank - The Zacks Rank is a proprietary model that uses earnings estimate revisions to guide investors in building successful portfolios [8] - Stocks rated 1 (Strong Buy) have historically produced an average annual return of +25.41%, significantly outperforming the S&P 500 [9] Stock Selection Strategy - To maximize returns, investors should focus on stocks with a Zacks Rank of 1 or 2 and Style Scores of A or B [11] - Stocks with lower ranks but high Style Scores may still pose risks due to downward earnings forecasts [12] Company Spotlight: Post Holdings - Post Holdings is a consumer-packaged goods holding company involved in various food categories and has a Zacks Rank of 2 (Buy) with a VGM Score of A [13] - The company has a Momentum Style Score of B, with shares increasing by 6.2% over the past four weeks and a consensus earnings estimate of $6.41 per share for fiscal 2025 [14]

Core Viewpoint - Post Holdings (POST) is identified as a strong value stock with a Zacks Rank of 2 (Buy) and an A grade for Value, indicating it is likely undervalued in the current market [3][7]. Valuation Metrics - The Price-to-Book (P/B) ratio for POST is 1.66, which is lower than the industry average of 1.96, suggesting a solid valuation compared to peers [4]. - The Price-to-Sales (P/S) ratio for POST stands at 0.81, compared to the industry's average of 0.97, indicating that POST may be undervalued based on sales performance [5]. - The Price-to-Cash Flow (P/CF) ratio for POST is 8.29, significantly lower than the industry average of 16.10, further supporting the notion that POST is undervalued [6]. Earnings Outlook - The strength of POST's earnings outlook, combined with its favorable valuation metrics, positions it as an impressive value stock at the moment [7].

Core Viewpoint - Post Holdings (POST) has received an upgrade to a Zacks Rank 2 (Buy), indicating a positive outlook based on rising earnings estimates, which significantly influence stock prices [1][2]. Earnings Estimates and Stock Price Impact - The Zacks rating system emphasizes the importance of changing earnings estimates in determining stock price movements, making it a valuable tool for investors [2][3]. - An increase in earnings estimates typically leads to higher fair value calculations by institutional investors, resulting in stock price movements [3]. Company Performance Indicators - For the fiscal year ending September 2025, Post Holdings is projected to earn $6.38 per share, reflecting a year-over-year increase of 1.8% [7]. - Over the past three months, the Zacks Consensus Estimate for Post Holdings has risen by 3.1%, indicating a positive trend in earnings expectations [7]. Zacks Rank System Overview - The Zacks Rank system classifies stocks into five groups based on earnings estimates, with a strong historical performance, particularly for Zacks Rank 1 stocks, which have averaged a +25% annual return since 1988 [6]. - The upgrade of Post Holdings to a Zacks Rank 2 places it in the top 20% of Zacks-covered stocks, suggesting a strong potential for market-beating returns in the near term [9].

Financial Data and Key Metrics Changes - First quarter consolidated net sales were $2 billion and adjusted EBITDA was $370 million, with net sales flat to the prior year including acquisitions [22] - Excluding acquisitions, sales decreased by 2% due to lower overall volumes in retail businesses, partially offset by volume growth in food service driven by elevated avian influenza pricing [22][23] - Adjusted EBITDA increased by 8% versus prior years, benefiting from strong manufacturing and supply chain cost performance [25] Business Line Data and Key Metrics Changes - Pet category consumption was down approximately 1%, with the portfolio declining by 5% due to lost distribution points in Nutrish and price elasticity in Gravy Train [10] - Foodservice net sales increased by 9% and volumes increased by 3%, driven by favorable volumes and elevated pricing [25] - Refrigerated retail net sales decreased by 5% and volumes decreased by 4%, with adjusted EBITDA down 22% primarily due to lower side dish volumes and increased manufacturing costs [27] Market Data and Key Metrics Changes - The cereal category volume declined by 3.2%, slightly more than planned assumptions, while the overall share was down slightly [10] - The macro environment remained challenging with continued pressure on consumer spending, impacting collective volumes across the sector [19] - The company estimates a cost headwind in the range of $30 million to $50 million for fiscal Q2 due to avian influenza impacts [14] Company Strategy and Development Direction - The company is focusing on innovation in the Pet segment, with a relaunch of Nutrish and new product launches in Nature's Recipe and Kibbles and Bits [11] - Capital allocation has prioritized share repurchase, buying back over 4% of shares while maintaining net leverage flat [21] - The company remains open to M&A opportunities, indicating a robust pipeline of potential transactions [20][39] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the current landscape despite unprecedented market price volatility [14] - The company anticipates challenges in sourcing and costs due to avian influenza but believes it can recover costs in the balance of the fiscal year [14][15] - Management noted that the macro environment is uncertain due to new administration policies, impacting consumer behavior [19][70] Other Important Information - The company successfully executed major ERP conversions at PCB, PET, and Weetabix during the quarter, which was a significant achievement [8] - The company raised the bottom end of its FY 2025 adjusted EBITDA guidance by $10 million, reflecting better-than-expected Q1 performance [31][68] Q&A Session Summary Question: Will Post consider larger scale M&A deals given current valuations? - Management indicated that they expect increased M&A activity and are well-positioned to consider both large and small opportunities despite recent share buybacks [36][39] Question: What is the outlook for demand in foodservice? - Management believes recovery in foodservice is self-contained and not reliant on overperformance in other segments, with a focus on improving margins through efficiency [54][55] Question: What are the risks associated with avian influenza? - Management highlighted that risks include the ability to procure eggs, pricing, and the ability to pass costs onto customers, with significant variability expected [72][74] Question: How is the company navigating the egg business amidst volatility? - Management stated that while volatility exists, the long-term growth trend remains strong, and they are focused on liquid egg business improvements rather than expanding into shell eggs [101][106] Question: What is the outlook for the cereal category? - Management acknowledged challenges in the cereal category but is exploring innovation and value chain strategies to improve performance [110][111]

Financial Performance - Net sales for the three months ended December 31, 2024, increased by $8.8 million, or less than 1%, to $1,974.7 million compared to the prior year period[103] - Operating profit for the same period increased by $4.8 million, or 2%, to $214.1 million, primarily driven by lower corporate expenses and higher segment profit in the Foodservice segment[105] - Net earnings attributable to the company for the three months ended December 31, 2024, increased by $25.2 million, or 29%, to $113.3 million[103] Segment Performance - The Post Consumer Brands segment experienced a net sales decrease of $24.7 million, or 2%, primarily due to a 4% decline in pet food product sales[113] - Weetabix segment net sales decreased by $1.5 million, or 1%, driven by a 7% decline in volumes, partially offset by a favorable foreign currency exchange impact of $3.9 million[115] - Foodservice segment net sales increased by $49.5 million, or 9%, driven by an 8% increase in egg product sales[117] - Refrigerated Retail segment net sales decreased by $14.3 million, or 5%, primarily due to lower side dish and cheese volumes[119] - Segment profit for Post Consumer Brands decreased by $1.7 million, or 1%, to $132.7 million, primarily due to lower net sales and increased integration costs of $9.0 million[114] - Segment profit for Weetabix decreased by $5.1 million, or 24%, to $15.9 million, impacted by higher raw material costs of $2.1 million[116] - Segment profit for Foodservice increased by $10.4 million, or 14%, to $75.7 million, supported by lower freight costs of $1.7 million[118] - Segment profit for Refrigerated Retail decreased by $11.4 million, or 32%, to $24.2 million, driven by higher raw material costs of $6.1 million[120] Cash Flow and Investments - Cash provided by operating activities increased by $136.0 million to $310.4 million for the three months ended December 31, 2024, driven by improved cash inflows from trade payables and inventory[131] - Cash used in investing activities was $128.3 million for the three months ended December 31, 2024, primarily due to capital expenditures of $139.0 million[132] - Cash used in financing activities was $94.2 million for the three months ended December 31, 2024, including $600.0 million from the issuance of 6.250% senior notes and $464.9 million redeemed from 5.625% senior notes[134] - The company reported a net increase in cash, cash equivalents, and restricted cash of $84.2 million for the three months ended December 31, 2024[130] Corporate Expenses and Tax - General corporate expenses decreased by $14.9 million, or 29%, to $37.3 million for the three months ended December 31, 2024, compared to the prior year period[121] - The effective income tax rate decreased from 24.4% in the prior year to 22.1% for the three months ended December 31, 2024[110] Acquisitions and Future Outlook - The company completed acquisitions of Perfection Pet Foods and Deeside Cereals on December 1, 2023, enhancing its product offerings in the pet food and cereal markets[98] - The company is focused on successfully integrating pet food assets acquired in April 2023 and achieving expected financial contributions and synergies from these acquisitions[144] - The company emphasizes the importance of new product introductions for future success[144] Compliance and Risks - The company was in compliance with its financial covenant under the Credit Agreement as of December 31, 2024[136] - The company believes it has sufficient liquidity and cash on hand to meet its capital needs for the foreseeable future[124] - The company faces various risks including supply chain disruptions, inflation, and labor shortages that could impact financial performance[144] - The company acknowledges the potential impact of economic conditions and financial instability on its operations[144] - The company is committed to maintaining compliance with existing and changing laws and regulations[144] - The company has a high leverage position and is focused on managing its outstanding debt and financing needs[144] Forward-Looking Statements - The company does not undertake any obligation to update forward-looking statements after the report date[146]

Financial Data and Key Metrics Changes - For Q1 fiscal 2025, consolidated net sales were $2 billion, and adjusted EBITDA was $370 million. Including acquisitions, net sales were flat compared to the prior year, while excluding acquisitions, sales decreased by 2% due to lower overall volumes in retail businesses [17][18] - Adjusted EBITDA for the Nutrish segment increased by 8% year-over-year, driven by strong manufacturing and supply chain cost performance [18] - Foodservice net sales increased by 9%, with volumes up by 3%, reflecting favorable volumes and elevated avian influenza-driven pricing [18] - Refrigerated retail net sales decreased by 5%, with volumes down by 4%, primarily due to declines in side dish, egg, and cheese products [19] Business Line Data and Key Metrics Changes - The cereal category saw a volume decline of 3.2%, slightly more than planned, while the pet category consumption was down approximately 1%, with the portfolio declining by 5% [9][10] - The Weetabix segment experienced a 1% decrease in net sales, with a 12% decline in volumes, although the core Weetabix product saw a 3.6% increase [14][20] - The foodservice segment had strong performance driven by volume growth in egg and potato products, with higher value-added eggs leading the way at a 5% increase [11] Market Data and Key Metrics Changes - The overall share in the cereal category remained flat at 22%, while the pet category's overall share decreased slightly [9][10] - The company estimates a cost headwind in Q2 of $30 million to $50 million compared to Q1 results due to avian influenza impacts [12] Company Strategy and Development Direction - The company is focusing on innovation in the pet segment, particularly with the relaunch of Nutrish and new product launches in Nature's Recipe and Kibbles and Bits [10] - Capital allocation has been focused on share repurchase, with over 4% of shares bought back while maintaining flat net leverage [15][16] - The company remains well-positioned to take advantage of opportunities arising from macro uncertainties, with a robust pipeline of potential M&A transactions [15][30] Management's Comments on Operating Environment and Future Outlook - Management noted that the macro environment remains challenging, with continued pressure on consumers and uncertainty due to new administration policies [15] - The company expressed confidence in navigating the current landscape despite unprecedented market price volatility [12] - Management raised the bottom end of FY 2025 adjusted EBITDA guidance by $10 million to a range of $1.42 billion to $1.46 billion, reflecting strong Q1 performance [21][49] Other Important Information - The company generated $310 million from operations and approximately $170 million in free cash flow net of CapEx spend during Q1 [21] - The company repurchased 1.6 million shares at an average price of approximately $114 per share, with a total of 2.6 million shares repurchased since the beginning of the fiscal year [21] Q&A Session Summary Question: Potential for larger scale M&A deals - Management acknowledged the likelihood of increased M&A activity in the current valuation environment and stated that they are well-positioned to consider opportunities despite recent share repurchases [26][30] Question: Flexibility in optimizing the pet supply chain - Management indicated that while there are opportunities for optimization, the primary focus remains on actions taken to enhance profitability and capacity for higher-margin products [32] Question: Foodservice EBITDA drag and demand outlook - Management believes the recovery in foodservice is self-contained and not reliant on performance in other segments, with a focus on improving margins through labor efficiency [38] Question: Risks associated with avian influenza - Management highlighted that risks for Q2 are primarily due to market price volatility and the timing of pricing adjustments, with a focus on recovering supply [52][63] Question: Egg business and market volatility - Management expressed confidence in the long-term growth of the egg business despite recent volatility, emphasizing the importance of pricing models that mitigate risk [75][78] Question: Cereal category performance and innovation - Management acknowledged challenges in the cereal category but is exploring innovation opportunities to enhance growth and adapt to changing consumer preferences [81]

Core Viewpoint - Post Holdings, Inc. reported an increase in both earnings and revenue year over year for the first quarter of fiscal 2025, with earnings exceeding expectations while sales fell short of estimates [1]. Financial Performance - Adjusted earnings per share were $1.73, surpassing the Zacks Consensus Estimate of $1.49, and improved from $1.69 in the same quarter last year [2]. - Net sales reached $1,974.7 million, a 0.4% increase year over year, including $60.8 million from acquisitions, but missed the Zacks Consensus Estimate of $1,975 million [3]. - Gross profit was $595.3 million, up 4% year over year, with gross margin expanding to 30.1% from 29.1% [4]. - Selling, general and administrative expenses rose 2.7% to $331.6 million, representing 16.8% of net sales compared to 16.4% in the prior year [4]. - Operating profit increased 2.3% to $214.1 million, and adjusted EBITDA was $369.9 million, a 2.9% increase from $359.5 million in the previous year [5]. Segment Performance - **Post Consumer Brands**: Reported net sales of $963.9 million, down 2.5% year over year, with volumes falling 8.8% when excluding acquisition impacts. Profit dropped 1.3% to $131 million [6]. - **Weetabix**: Net sales declined 1.2% to $127.6 million, with volumes down 11.6% when excluding acquisition impacts. Profit fell 24.3% to $15.9 million [7]. - **Foodservice**: Achieved 8.7% growth in net sales to $616.6 million, with volumes up 2.8%. Profit increased 13.7% to $86.1 million [8]. - **Refrigerated Retail**: Sales dipped 5.1% to $266.6 million, with volumes down 4.4%. Profit fell 32% to $24.2 million [9]. Other Financial Aspects - The company ended the quarter with cash and cash equivalents of $872.9 million and long-term debt of $6,944.4 million [10]. - In Q1 FY25, Post Holdings repurchased 1.6 million shares for $181.1 million and approved a new $500 million share repurchase program [11]. Future Guidance - The company updated its fiscal year 2025 Adjusted EBITDA guidance to a range of $1,420-$1,460 million, up from the previous range of $1,410-$1,460 million [13]. - Capital expenditures for FY25 are expected to be between $380 and $420 million, with significant investments in network optimization and pet food safety [14].

Core Insights - Post Holdings reported $1.97 billion in revenue for the quarter ended December 2024, a year-over-year increase of 0.5% [1] - The EPS for the same period was $1.73, compared to $1.69 a year ago, with an EPS surprise of +16.11% against a consensus estimate of $1.49 [1] Revenue Performance - Net Sales for Weetabix were $127.60 million, below the four-analyst average estimate of $129.84 million, representing a year-over-year change of -1.2% [4] - Net Sales for Post Consumer Brands were $963.90 million, also below the four-analyst average estimate of $993.26 million, with a year-over-year change of -2.5% [4] - Net Sales for Foodservice reached $616.60 million, exceeding the average estimate of $581.07 million, reflecting a year-over-year change of +8.7% [4] - Net Sales for Refrigerated Retail were $266.60 million, below the average estimate of $273.42 million, with a year-over-year change of -5.1% [4] Adjusted EBITDA Performance - Adjusted EBITDA for Post Consumer Brands was $204.80 million, surpassing the average estimate of $193.67 million [4] - Adjusted EBITDA for Weetabix was $28 million, slightly below the average estimate of $29.75 million [4] - Adjusted EBITDA for Foodservice was $116.80 million, exceeding the average estimate of $108.30 million [4] - Adjusted EBITDA for Corporate/Other was -$21.30 million, close to the average estimate of -$21.43 million [4] - Adjusted EBITDA for Refrigerated Retail was $41.60 million, below the average estimate of $46.80 million [4] Stock Performance - Shares of Post Holdings have returned -2.6% over the past month, while the Zacks S&P 500 composite has changed by +2.1% [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating potential performance in line with the broader market in the near term [3]