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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) after missing the number in the most recent earnings release.  Food stocks are seeing a lot of headwinds of late, but this trend could flip.  Instead, let’s look at why this stock is  a Zacks Rank #5 (Strong Sell) and in thisBear of the Day article.

Description

Based in Missouri, Post Holdings is a consumer-packaged goods holding company, which is involved in the production of center-of-the-store, refrigerated, foodservice, food ingredient and convenient nutrition product categories. It also engages in the private brand food category.

The company comprises five segments, including BellRing Brands, which operates as a separate entity.

Post Consumer Brands consists private label ready-to-eat (RTE) cereal products. Some notable brands of RTE include Honey Bunches of Oats, Pebbles, Oreo O’s, Hostess Donettes, HostessHoney Bun, Great Grains and Grape-Nuts among others.

Earnings History

When I look at a stock, the first thing I do is look to see if the company is beating the number.  This tells me right away where the market’s expectations have been for the company and how management has communicated to the market.  A stock that consistently beats has management communicating expectations to Wall Street that can be achieved.  That is what you want to see.

In the case of POST, I see four straight misses of the  Zacks Consensus Estimate.   This alone does not make the stock a Zacks Rank #1 (Strong Buy) and it doesn’t make it a Zacks Rank #5 (Strong Sell) either.

The Zacks Rank does care about the earnings history, but it is much more heavily influenced by the movement of earnings estimates.

Earnings Estimates

The Zacks Rank tells us which stocks are seeing earnings estimates move higher or in this case lower.  For POST I see annual estimates moving lower.

The Zacks Rank is more heavily influenced by the move in the annual numbers, and the movement is mixed for those numbers.

The current year 2022 consensus number has dropped from $3.13 to $1.11.

The next year has dropped from $3.97 to $1.87 over the last 60 days.

Negative movement in earnings estimates like that is why this stock is a Zacks Rank #5 (Strong Sell).

It should be noted that a majority of stocks in the Zacks universe are seeing positive earnings estimate revisions.  That means that the stocks that are seeing small but negative earnings estimate revisions are falling to a Zacks Rank #5 (Strong Sell).

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