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Bear of the Day: Post Holdings (POST)

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Post Holdings (POST - Free Report) is a Zacks Rank #5 (Strong Sell) that is a consumer package goods holding company. The stock has recently seen a technical pullback and investors should be concerned about earnings next month.

About the company

Post is headquartered in St. Louis, MO and employs over 10,000 people. The company was founded in 1895 and has a market cap of almost $6 billion. Post has a Zacks Style Score of “B” in Value, but “C” in Growth and “D” in Momentum.

The company has five segments including: Post Consumer, Weetabix, Foodservice, Refrigerated Retail and BellRing. The largest segment is the Post Consumer Brands which is 33% of FY19 sales and consists of ready -to-eat cereal products. Some popular brands include Honey Bunches of Oats, Pebbles, Grape-Nuts, Golden Crisp and more.

Earnings and Estimates

The company reported earnings back in August, seeing a 12% surprise to the upside. The stock didn’t really respond to the news, but started heading higher into September. However, the stock lost its momentum and has started to come in. With the recent market sell off, the stock has fallen 10% from the highs as earnings approach.  

While the current quarter has ticked higher over the last 7 days, estimates have been trending lower. Over the last three months, estimate have fallen from $0.99 to $0.74 or 25%.

For next year, we are seeing estimates tick lower over the last 7 days, falling from $4.62 to $4.58. While this isn’t significant, analyst see issues as we head into 2021.

Technical Take

Perhaps the biggest red flag for the stock is the chart. After taking back the 200-day MA above $90, the bulls failed to hold it this week. From there, we saw a 10% drop and no support at the 50-day MA at $88. This is a worrisome failure of support as we head into earnings in just a few weeks. If the stock were to break September lows, the March lows around $70 could be in play.

In Summary

When a stock breaks is moving averages its best to sit back and wait. With earnings approaching in just a few weeks, investors should avoid POST until there is some clarity on the price action. A disappointing report could lead to another leg down. For those looking to go long, a good report with a move back over the 200-day would offer a bullish setup.

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