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Post Holdings Inc POST

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Morningstar’s Analysis

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Labor Shortages and Supply Chain Disruption Hampers Post’s Q4 Results; Shares Modestly Undervalued

Analyst Note

| Rebecca Scheuneman, CFA |

In no-moat Post’s fiscal fourth quarter, labor constraints and supply chain disruptions resulted in missed sales opportunities and higher operating costs as input shortages, unreliable transportation, and insufficient staff caused production lines to sit idle. Fiscal 2021 organic sales grew 5.2%, topping our 4.2% estimate given higher prices, despite unfilled orders for Premier Protein shakes, as well as egg and potato products. Post’s 2021 gross and adjusted EBITDA margins contracted 220 and 200 basis points, respectively, to 29.1% and 18.0%, missing our call for 30.5% and 19.2%. In late August, Post had significant shortages at six plants, which has improved to three plants currently, and we think this disruption will hinder Post’s performance for much of fiscal 2022. We plan to lower our fiscal 2022 estimates, which call for 5% organic sales growth and adjusted EBITDA of $1.36 billion, above newly issued EBITDA guidance of $1.16 billion-$1.2 billion. This should result in a mid-single-digit drop to our $114 fair value estimate. With shares down a similar rate, the stock looks modestly undervalued.

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Company Profile

Business Description

Post Holdings is a packaged food company that primarily operates in North America and Europe. For fiscal 2020, 42% of the company’s revenue came from cereal, with brands such as Honeycomb, Grape-Nuts, Shredded Wheat, Pebbles, Honey Bunches of Oats, Malt-O-Meal, Weetabix, and Alpen. Refrigerated food made up 41% of 2020 revenue and services the retail (17% of company sales) and food-service channels (24%), providing value-added egg and potato products, prepared side dishes, cheese, and sausage under brands Bob Evans and Simply Potatoes. The stake in BellRing Brands makes up the remaining 17% of revenue, with protein-based shakes, powders, and bars that sell under the Premier Protein, PowerBar, and Dymatize brands, but Post is reducing this holding to a minority position in calendar 2022.

2503 South Hanley Road
St. Louis, MO, 63144
T +1 314 644-7600
Sector Consumer Defensive
Industry Packaged Foods
Most Recent Earnings Sep 30, 2021
Fiscal Year End Sep 30, 2022
Stock Type Slow Growth
Employees 10,735