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Bull of the Day: Post Holdings (POST)

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The planning stage of long-term corporate projects is complicated and tends to run into unforeseen difficulties.  But when, after many months of planning and preparing, the strategy comes to fruition it is a wonderful thing to witness.  This is the case with the Zacks Bull of the Day, Post Holdings (POST - Free Report) .  This company, through strategic planning, calculated acquisitions, and cost containment has caused management to increase guidance for fiscal year 2016. 

This Zacks Rank #1 (Strong Buy) company is a manufacturer, marketer and distributor of branded ready-to-eat cereals in the United States and Canada. The Company's products are manufactured through a production platform consisting of four owned primary facilities and sold through a variety of channels such as grocery stores, mass merchandisers, club stores, and drug stores. Its portfolio of brands includes diverse offerings such as Honey Bunches of Oats, Pebbles, Post Selects, Great Grains, Spoon Size Shredded Wheat, Post Raisin Bran, Grape-Nuts and Honeycomb. Post Holdings Inc. is based in St. Louis, Missouri.

Strong Q2 16 Earnings Report

In their most recent earnings report Post Holdings almost doubled the Zacks Consensus Earnings Estimate, and handily beat the Zacks Consensus Revenue Estimate.  Specifically, the company saw year over year gains in net sales (+20.7%), gross profit (+48.6%), and adjusted EBITDA (+66.1%).  Moreover, the company saw gains in net sales in all four divisions; Post Consumer Brands, Michael Foods Group, Active Nutrition, and Private Brands.  According to management, “The sales increase was driven by the fiscal 2015 acquisition of MOM Brands and the fiscal 2016 acquisition of Willamette Egg Farms, as well as organic sales growth.”

Management Raised Guidance for FY 2016

Because of the strong Q2 16 performance management increased their fiscal 2016 Adjusted EBITDA guidance to a range between $893m to $913m, this is up from the previous guidance range of $810m to $840m.  Further, according to management, they continue “to expect to achieve $50 million in run-rate annualized cost synergies within the Post Consumer Brands segment by the end of fiscal year 2016 and also announced an additional $25 million in run-rate annualized cost synergies, which are expected to be achieved by the end of fiscal year 2018.”

Estimates Graph

As you can see from the graph below, Post Holdings is seeing a nice upwards trend in both price and future estimate growth expectations.

Increasing Consensus Estimates

Due to the strong earnings performance and increased guidance for FY 2016, earnings estimates for Q3 16, Q4 16, FY 16, and FY 17 have all seen upgrades over the past 30 days; Q3 16 rose from $0.38 to $0.48, Q4 16 improved from $0.37 to $0.42, FY 16 jumped up from $1.93 to $2.26, and FY 17 moved up from $2.23 To $2.37.

Bottom Line

Due to management’s long term planning the company has seen solid traction from their recent acquisitions, and improvements in organic sales.  Finally, the company has about $870 million in cash for additional acquisitions that could enhance their long term plans. 

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