October 1, 2022
Zacks Investment Research

Post Holdings, Inc. POST, which recently distributed 80.1% of its interest in BellRing Brands, Inc., offered its adjusted EBITDA guidance for fiscal 2022. Also, the company informed about an avian influenza case at one of Michael Foods’ owned egg-laying facilities. An egg-laying flock owned by Michal Foods in Nebraska tested positive for avian influenza. The facility has around two million egg-laying hens, indicating roughly 4% of Post Holdings’ controlled supply.

Speaking of the adjusted EBITDA guidance, management expects fiscal 2022 adjusted EBITDA in the range of $910-$940 million, excluding BellRing for the entire fiscal. The historical results of BellRing will form part of the company’s discontinued operations. The view includes all variables, such as those related to the labor market and input costs, as well as the latest avian influenza-related announcement. However, the company does not anticipate offering any other update to its guidance until its second-quarter earnings results.

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What Else to Know?

Of late, Post Holdings has been benefiting from the recovery in its foodservice business. Sales in the foodservice unit increased 23.7% to $438.6 million in the first quarter of fiscal 2022, including the benefits of $12.7 million from the Almark acquisition. Volumes rose 13.3%, including a 150-basis point (bps) benefit from the Almark buyout. The upside in volumes can be attributed to higher away-from-home egg and potato demand. Egg volumes rose 6.5% (including a 190-bps benefit from Almark) and potato volumes rallied 49.7%.

On itsearnings call management highlighted that volumes in certain channels and product categories in the foodservice business have almost fully recovered to pre-pandemic levels. In aggregate, overall foodservice volumes are still below pre-pandemic levels. That said, the company expects the foodservice business to return to pre-pandemic profitability in fiscal 2023.

POST has been benefiting from its focus on acquisitions, which has been helping the company expand its customer base. In the first quarter of fiscal 2022, the company’s top line included $97.8 million in net sales from acquisitions. This includes the Private label ready-to-eat cereal business, the Egg Beaters liquid egg brand, the Almark Foods business and related assets and the Peter Pan peanut butter brand. Post Holdings acquired Almark Foods (or Almark) on Feb 1, 2021. Also, on Jan 25, Post Holdings acquired Conagra Brands’ Peter Pan peanut butter brand. The Peter Pan peanut butter is one of the leading brands that cater to a diversified customer base in key channels.

However, the Zacks Rank #5 (Strong Sell) company has been witnessing labor shortages, input and freight inflation and other supply-chain disruptions. This led to higher manufacturing costs and hurt sales to some extent in the last reported quarter. Elevated per unit product costs escalated, while service levels and fill rates remained below normal levels along with lower inventories. These factors are likely to persist in fiscal 2022. Apart from this, POST’s SG&A expenses increased 2.5% year over year to $257.3 million. The persistence of the trend is a concern.

Shares of the company have tumbled 8.1% in the past three months compared with the industry’s dip of 0.4%.

A Renowned Consumer Staple Stock

A popular pick from the broader Zacks Consumer Staples sector is Altria Group, Inc. MO, which has also been benefiting from its strong pricing power and a focus on oral tobacco products, such as on!. For 2022, Altria envisions 4% to 7% growth in the bottom line, which is likely to be more weighted toward the second half.  This tobacco giant currently carries a Zacks Rank #3 (Hold). Shares of MO have increased 9.9% in the past three months. The Zacks Consensus Estimate for the company’s current financial-year earnings per share (EPS) suggests growth of around 5% from the year-ago reported figure.

Let’s Check These Solid Bets

Some better-ranked stocks are Sysco Corporation SYY and Flowers Foods FLO.

Sysco, which engages in the marketing and distribution of various food and related products, carries a Zacks Rank #2 (Buy) at present. Shares of Sysco have jumped 6.6% in the past three months. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Sysco’s current financial-year sales and EPS suggests growth of 30.4% and 120.1%, respectively, from the year-ago reported number. SYY has a trailing four-quarter earnings surprise of 3.7%, on average.

Flowers Foods, the producer and marketer of packaged bakery products, currently carries a Zacks Rank #2. Shares of Flowers Foods have declined 7.3% in the past three months.

The Zacks Consensus Estimate for Flowers Foods’ current financial-year sales and EPS suggests growth of 7.2% and roughly 4%, respectively, from the year-ago reported figure. FLO has a trailing four-quarter earnings surprise of around 9%, on average.

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Altria Group, Inc. (MO): Free Stock Analysis Report
 
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Flowers Foods, Inc. (FLO): Free Stock Analysis Report
 
Post Holdings, Inc. (POST): Free Stock Analysis Report
 
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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