Analyst Note| Rebecca Scheuneman, CFA |
In its fiscal third quarter, no-moat Post reported 13% organic sales growth as it lapped a 7% drop in sales in the year-ago period, besting our 11% growth estimate, and matching that of FactSet consensus. Strength was driven by a 67% snap-back in the food-service segment, and by an astounding 68% pop in the BellRing Brands division. The latter’s strength was driven by Premier Protein shakes (82% of BellRing) which continued to exhibit remarkable all-channel retail sales growth (averaging 30% in the past year). BellRing was also boosted by gains in points of distribution, and an easy comparison as it lapped a 14% drop in the year-ago quarter, when consumers pulled back on their purchases of on-the-go snacks. This strength was partially offset by sales declines in Post’s other segments (primarily cereal, eggs and potatoes consumed at home), given last year’s pantry-stocking surge. We plan to make a mid-single-digit increase in our $110 fair value estimate given the better-than-expected sales, time value of money benefits since our last update, partially offset by a higher expected U.S. corporate tax rate to 26% from 21% beginning in 2022.