Post Holdings, Inc. POST continues to navigate pressure in the cereal category, where volume trends remain soft amid category declines and distribution challenges in parts of its value cereal portfolio. At the same time, management is seeing encouraging signs in its premium cereal offerings, which are gaining market share, while broader category trends have been improving gradually.
The company’s premium portfolio is gaining market share, while management expects cereal volume performance to move closer to the category next year. Management tied part of the current gap with the category to assortment changes designed to improve promotional performance and efficiency. The assortment adjustments accounted for 1 percentage point of the gap versus the category, representing 50% of the gap. The remaining difference is tied to distribution losses in the Malt-O-Meal brand, particularly among lower-velocity SKUs, while the rest of the portfolio is performing well.
Despite continued pressure in the cereal category, Post Holdings highlighted that the category has been improving gradually quarter after quarter and is moving closer to its view of the category’s long-term sustainable trend of approximately negative 1% to negative 2%. The category has not yet reached that level, but management said that it is gradually getting closer. In addition, cereal could benefit from affordability trends, given that it remains one of the cheapest breakfast categories. It also provides a low-cost way to deliver the right nutrients in a breakfast, which management believes could make cereal a longer-term opportunity.
Looking ahead, management expects cereal to remain under volume pressure, with an initial assumption of approximately 2.5% cereal category decline in fiscal 2027, while noting that the exact outcome remains uncertain. However, management expects POST’s cereal volumes to move closer to category performance next year, while cereal’s affordability could provide a longer-term category opportunity.
The Zacks Rundown for POST
The company’s shares have lost 7.5% in the past three months against the industry’s 6% growth.
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From a valuation standpoint, POST trades at a forward price-to-earnings ratio of 12.40, lower than the industry’s average of 14.74. POST currently carries a Zacks Rank #3 (Hold).
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The Zacks Consensus Estimate for POST’s current fiscal year earnings implies a year-over-year increase of 4.6%, and the same for next fiscal year earnings implies a decline of 10.3%.
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Stocks to Consider
Some better-ranked stocks have been discussed below:
The Chef’s Warehouse, Inc. CHEF distributes specialty food and center-of-the-plate products in the United States, the Middle East, and Canada. CHEF currently carries 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 CHEF’s current fiscal-year sales and earnings indicates growth of 10.6% and 33.7%, respectively, from the year-ago reported figures. CHEF delivered a trailing four-quarter earnings surprise of 30.4%, on average.
Darling Ingredients Inc. DAR develops, produces, and sells sustainable natural ingredients from edible and inedible bio-nutrients in North America, Europe, China, South America, and internationally. DAR currently carries a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for DAR’s current fiscal-year sales and earnings implies growth of 11.5% and 926.5%, respectively, from the year-ago actuals. DAR delivered a trailing four-quarter negative earnings surprise of 38.9%, on average.
Utz Brands, Inc. UTZ, together with its subsidiaries, markets, sells and distributes fresh, frozen, and dry food and non-food products to foodservice customers in the United States. UTZ currently carries a Zacks Rank #2.
The Zacks Consensus Estimate for UTZ’s current fiscal-year sales implies growth of 3.7%, and the same for earnings implies a decline of 2.4% from the year-ago actuals. UTZ delivered a trailing four-quarter earnings surprise of 1.8%, on average.
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Post Holdings, Inc. (POST): Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).