Post Holdings, Inc. POST is reaping benefits from a favorable pricing environment. Strength in the Post Consumer Brands is a key driver for this consumer-packaged goods company. POST undertakes strategic acquisitions to grow its portfolio. That being said, POST is not immune to an inflationary environment.

Let’s delve deeper.

Pricing & Brand Strength

Post Holdings has been benefiting from strategic pricing actions undertaken to counter inflationary headwinds. The trend continued in the first quarter of fiscal 2024, with the top and bottom lines increasing year over year and surpassing the Zacks Consensus Estimate. Higher average net selling prices drove the company’s performance in the Post Consumer Brands and Weetabix segments.

In the fiscal first quarter, Post Consumer Brands’ net sales of $988.6 million surged 78.2%, primarily owing to gains from acquisitions. The company’s pet food and grocery business delivered impressive results in the segment. The Pet food business performed better than expected on the back of solid manufacturing performance. The Grocery business gained from carryover pricing. The segment’s profit registered significant growth, up 67.3% to $132.7 million, with adjusted EBITDA rising 68.1% to $189.8 million. This reflects strong operational performance and acquisition synergies. Zacks Investment Research

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Buyouts: Key Driver

Post Holdings intends to strengthen its business on the back of strategic acquisitions. In December 2023, the company acquired Perfection Pet, which is part of its Post Consumer Brands segment. On Apr 28, 2023, Post Holdings acquired a select pet food brand from The J.M. Smucker Co. Such an acquisition provides the company with a compelling entry point into the attractive and growing pet food category. In December 2023, the company also acquired Deeside Cereals to form a part of its Weetabix segment. In the first quarter of fiscal 2024, the company’s net sales included $428.9 million from acquisitions. These buyouts are expected to continue boosting performance in the forthcoming period.

Hurdles on the Way

Post Holdings is operating amid a challenging macroeconomic environment. The company is witnessing persistent inflationary pressures in areas like sugar prices and labor costs. Inflationary headwinds coupled with higher interest rates are straining consumer’s spending power. In addition, reduced benefit support among economically sensitive consumers is compelling shoppers to be selective with their purchases.

In addition, the company has been battling with rising selling, general and administrative (SG&A) costs for a while now. In the fiscal first quarter, SG&A expenses escalated 41.2% to $322.9 million, whereas as a percentage of net sales, the metric increased 180 basis points to 16.4% on targeted marketing investments, among other reasons. The persistence of the trend is concerning for the company. Focusing on the upsides mentioned above is likely to keep aiding the company’s performance.

The Zacks Rank #3 (Hold) stock has increased 10.6% in the past three months against the industry’s 1.3% decline.



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