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Can Post Holdings' Foodservice Growth Counter Retail Headwinds?
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Key Takeaways
POST's third-quarter results topped expectations, due to stronger-than-anticipated Foodservice performance.
Foodservice has a normalized EBITDA run rate of about $500 million, with further growth potential.
POST expects fiscal 2027 adjusted EBITDA to remain near $1.48 billion despite volume and inflation pressures.
Post Holdings, Inc. (POST - Free Report) reported third-quarter fiscal 2026 results slightly ahead of expectations, driven by stronger-than-anticipated performance in Foodservice. The company expects Foodservice growth to offset some of the pressure facing its retail businesses.
Management’s preliminary fiscal 2027 outlook indicates adjusted EBITDA to remain relatively consistent with the comparable base of approximately $1.48 billion. Despite normalizing Foodservice earnings, the absence of divested businesses, anticipated inflation and ongoing volume pressure, targeted pricing, cost savings and Foodservice line-rate growth are expected to provide offsets.
Foodservice has an estimated normalized EBITDA run rate of approximately $500 million, which management views as the business’s current earning power under normalized conditions. Management defines normalization through three factors: balanced supply and demand, normalized inventories and a more balanced relationship between market and grain-based egg pricing. Management said that its internal supply-and-demand position and inventories are now back in balance, while an imbalance remains between market and grain-based egg pricing. Management believes Foodservice can grow beyond the $500 million run rate in fiscal 2027.
However, retail businesses continue to face inflation and volume pressures. Management expects pricing to come more toward the end of the fiscal year, with Post Consumer Brands currently the area where it sees most of the potential pricing. Cereal volume is currently expected to decline by approximately 2.5%, although management cautioned that the figure remains uncertain. Dry dog food, which represents 60% of the pet portfolio, is underperforming its category and is expected to be a volume headwind.
Overall, Foodservice growth is expected to provide an important offset to pressures across Post Holdings’ retail businesses, with targeted pricing, cost savings and Foodservice line-rate growth supporting the company’s preliminary fiscal 2027 outlook.
The Zacks Rundown for POST
The company’s shares have lost 13.2% in the past three months against the industry’s 5.5% growth.
Image Source: Zacks Investment Research
From a valuation standpoint, POST trades at a forward price-to-earnings ratio of 11.33, lower than the industry’s average of 14.56. POST currently carries a Zacks Rank 3 (Hold).
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for POST’s current fiscal year earnings implies a year-over-year increase of 4.6%, and the same for next fiscal year earnings implies a decline of 10.3%.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks have been discussed below:
The Chef’s Warehouse, Inc. (CHEF - Free Report) distributes specialty food and center-of-the-plate products in the United States, the Middle East, and Canada. CHEF currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for CHEF’s current fiscal-year sales and earnings indicates growth of 10.6% and 33.7%, respectively, from the year-ago reported figures. CHEF delivered a trailing four-quarter earnings surprise of 30.4%, on average.
Darling Ingredients Inc. (DAR - Free Report) develops, produces, and sells sustainable natural ingredients from edible and inedible bio-nutrients in North America, Europe, China, South America, and internationally. DAR currently carries a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for DAR’s current fiscal-year sales and earnings implies growth of 11.5% and 926.5%, respectively, from the year-ago actuals. DAR delivered a trailing four-quarter negative earnings surprise of 38.9%, on average.
Utz Brands, Inc. (UTZ - Free Report) , together with its subsidiaries, markets, sells and distributes fresh, frozen, and dry food and non-food products to foodservice customers in the United States. UTZ currently carries a Zacks Rank #2.
The Zacks Consensus Estimate for UTZ’s current fiscal-year sales implies growth of 3.7%, and the same for earnings implies a decline of 2.4% from the year-ago actuals. UTZ delivered a trailing four-quarter earnings surprise of 1.8%, on average.
View the Zacks #1 Rank List
Image: Bigstock
Can Post Holdings' Foodservice Growth Counter Retail Headwinds?
Key Takeaways
Post Holdings, Inc. (POST - Free Report) reported third-quarter fiscal 2026 results slightly ahead of expectations, driven by stronger-than-anticipated performance in Foodservice. The company expects Foodservice growth to offset some of the pressure facing its retail businesses.
Management’s preliminary fiscal 2027 outlook indicates adjusted EBITDA to remain relatively consistent with the comparable base of approximately $1.48 billion. Despite normalizing Foodservice earnings, the absence of divested businesses, anticipated inflation and ongoing volume pressure, targeted pricing, cost savings and Foodservice line-rate growth are expected to provide offsets.
Foodservice has an estimated normalized EBITDA run rate of approximately $500 million, which management views as the business’s current earning power under normalized conditions. Management defines normalization through three factors: balanced supply and demand, normalized inventories and a more balanced relationship between market and grain-based egg pricing. Management said that its internal supply-and-demand position and inventories are now back in balance, while an imbalance remains between market and grain-based egg pricing. Management believes Foodservice can grow beyond the $500 million run rate in fiscal 2027.
However, retail businesses continue to face inflation and volume pressures. Management expects pricing to come more toward the end of the fiscal year, with Post Consumer Brands currently the area where it sees most of the potential pricing. Cereal volume is currently expected to decline by approximately 2.5%, although management cautioned that the figure remains uncertain. Dry dog food, which represents 60% of the pet portfolio, is underperforming its category and is expected to be a volume headwind.
Overall, Foodservice growth is expected to provide an important offset to pressures across Post Holdings’ retail businesses, with targeted pricing, cost savings and Foodservice line-rate growth supporting the company’s preliminary fiscal 2027 outlook.
The Zacks Rundown for POST
The company’s shares have lost 13.2% in the past three months against the industry’s 5.5% growth.
Image Source: Zacks Investment Research
From a valuation standpoint, POST trades at a forward price-to-earnings ratio of 11.33, lower than the industry’s average of 14.56. POST currently carries a Zacks Rank 3 (Hold).
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for POST’s current fiscal year earnings implies a year-over-year increase of 4.6%, and the same for next fiscal year earnings implies a decline of 10.3%.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks have been discussed below:
The Chef’s Warehouse, Inc. (CHEF - Free Report) distributes specialty food and center-of-the-plate products in the United States, the Middle East, and Canada. CHEF currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for CHEF’s current fiscal-year sales and earnings indicates growth of 10.6% and 33.7%, respectively, from the year-ago reported figures. CHEF delivered a trailing four-quarter earnings surprise of 30.4%, on average.
Darling Ingredients Inc. (DAR - Free Report) develops, produces, and sells sustainable natural ingredients from edible and inedible bio-nutrients in North America, Europe, China, South America, and internationally. DAR currently carries a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for DAR’s current fiscal-year sales and earnings implies growth of 11.5% and 926.5%, respectively, from the year-ago actuals. DAR delivered a trailing four-quarter negative earnings surprise of 38.9%, on average.
Utz Brands, Inc. (UTZ - Free Report) , together with its subsidiaries, markets, sells and distributes fresh, frozen, and dry food and non-food products to foodservice customers in the United States. UTZ currently carries a Zacks Rank #2.
The Zacks Consensus Estimate for UTZ’s current fiscal-year sales implies growth of 3.7%, and the same for earnings implies a decline of 2.4% from the year-ago actuals. UTZ delivered a trailing four-quarter earnings surprise of 1.8%, on average.