It has been about a month since the last earnings report for Post Holdings (POST - Free Report) . Shares have lost about 3% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Post Holdings due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Post Holdings Q3 Earnings Beat Estimates, Sales Down
Post Holdings reported third-quarter fiscal 2020 results, with the top line declining year over year. Also, sales missed the Zacks Consensus Estimate. Nevertheless, earnings surpassed the consensus mark.
The company witnessed an increase in demand for its products, which are sold online as well as through food, drug, mass, thanks to the coronavirus outbreak-led higher at-home consumption. However, Post Holdings’ Foodservice business has been adversely impacted by lower demand from full service restaurants, quick service restaurants, education, and travel and lodging amid the pandemic. Nevertheless, volumes in the Foodservice unit improved in the third quarter from April levels.
Q3 in Detail
Adjusted earnings were 75 cents per share, surpassing the Zacks Consensus Estimate of 67 cents in the fiscal third quarter.
The company registered sales of $1,336.4 million, reflecting a decline of 7.1% from $1,439.2 million in the prior-year quarter. Moreover, the figure missed the consensus mark of 1,348 million. The downside was caused by decline in the Foodservice business stemming from reduced away-from-home consumption amid the coronavirus outbreak. Also, sluggishness in BellRing brands due to lower customer trade inventory levels was a reason.
Further, gross profit of $436.8 million declined 5.5%, whereas the gross margin expanded 60 basis points (bps) to 32.7% in the quarter under review.
Meanwhile, the company witnessed SG&A expenses of $224.2 million were slightly up from $223.2 in the year-ago quarter. SG&A expenses, as a percentage of sales, expanded 130 bps to 16.8% in the reported quarter.
Post Holdings generated operating profit of $172.1 million in the reported quarter. This depicts a decline of 13.2% from $198.2 million in the year-ago quarter thanks to sluggishness in the Foodservice business.
Adjusted EBITDA declined 14.1% to $270.9 million from $315.4 million in the prior-year quarter. For fourth-quarter fiscal 2020, the company anticipates Adjusted EBITDA to be nearly similar to the figure reported in the fiscal third quarter.
Post Consumer Brands: Sales in the segment increased 11.4% year over year to $528.1 million in the quarter. Volumes increased 7.5% on the back of higher at-home consumption amid the pandemic along with distribution gains from private label. Segmental profit was $127.6 million, up 54.3% from the prior-year quarter’s levels.
Weetabix: Segmental sales increased 3.1% to $111.8 million in the reported quarter. Volumes increased to the tune of 4.1%, while average net pricing was higher by 2.6%. Volumes gained from higher at-home consumption stemming from increased consumption of biscuit cereal products and favorable impact from food initiatives carried out by the government. Segmental profit of $32.6 million increased 21.6% year over year.
Foodservice: Sales slumped 41.3% to $242.3 million in the quarter under review. Volumes declined 41.8% due to reduced away-from-home demand amid COVID-19 in various foodservice channels like full service restaurants, quick service restaurants, lodging, education and travel. Segmental loss was $40.3 million, down significantly on a year-over-year basis.
Refrigerated Retail: Sales in the segment were $250.3 million, up 20.9% from the year-ago quarter’s levels. Volumes rose 5.1% year over year. Segmental profit of $42.3 million improved significantly year over year.
BellRing Brands: Sales of $204.2 million declined 14.1%. Sales in Premier Protein brand, which declined 11.9%,were hurt by reduced customer trade inventory levels of RTD protein shakes as well as lower on-the-go consumption amid coronavirus. Moreover, sales in Dymatize and PowerBar brands fell 16.6% and 44.2%, respectively. Segmental profit of $30.6 million declined 45% due to increased marketing and advertising costs along with increased public company expenses.
The company concluded the quarter with cash and cash equivalents of $1,043.6 million, long-term debt of $6,776.9 million and shareholders’ equity of $2,879.6 million.
Cash provided by operating activities was $408.4 million at the end of nine months ended Jun 30, 2020. During the quarter under review, Post Holdings bought back 0.4 million shares worth $33.1 million. Further, the company approved a new share repurchase program of $400 million on Aug 4, 2020.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision. The consensus estimate has shifted -26.33% due to these changes.
At this time, Post Holdings has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Post Holdings has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.