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Post Holdings Inc POST

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No-Moat Post Sees a Strong Q3 Sales Recovery in Food Service, but Shares Appear Fully Valued

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.

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Company Profile

Business Description

Post Holdings is a packaged food company that primarily operates in North America and Europe. For fiscal 2020, 42% of the company’s revenue came from cereal, with brands such as Honeycomb, Grape-Nuts, Shredded Wheat, Pebbles, Honey Bunches of Oats, Malt-O-Meal, Weetabix, and Alpen. Refrigerated food made up 41% of 2020 revenue and services the retail (17% of company sales) and food-service channels (24%), providing value-added egg and potato products, prepared side dishes, cheese, and sausage under brands Bob Evans and Simply Potatoes. The stake in BellRing Brands makes up the remaining 17% of revenue, with protein-based shakes, powders, and bars that sell under the Premier Protein, PowerBar, and Dymatize brands, but Post is reducing this holding to a minority position in calendar 2022.

2503 South Hanley Road
St. Louis, MO, 63144
T +1 314 644-7600
Sector Consumer Defensive
Industry Packaged Foods
Most Recent Earnings Jun 30, 2021
Fiscal Year End Sep 30, 2021
Stock Type Slow Growth
Employees 10,200