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On Monday, an analyst at Evercore ISI increased the price target for Post Holdings (NYSE:POST), a consumer packaged goods holding company, from $123.00 to $126.00, while maintaining an Outperform rating on the stock. The revision follows Post Holdings' recent earnings report, which revealed a better-than-expected EBITDA for the quarter and a positive outlook for the future.
The analyst expressed optimism about Post Holdings' financial trajectory, noting an increase in the FY25 EBITDA estimate to $1.447 billion, marking a 3% year-over-year growth. This new estimate surpasses both the previous forecast of $1.421 billion and the consensus estimate of $1.418 billion. The raised price target implies a calendar year 2025 enterprise value to EBITDA multiple of 10 times, aligning with the average for centerstore food companies.
Several factors contribute to the favorable perspective on Post Holdings' performance. Improved consumer confidence is expected to boost restaurant traffic, benefiting brands such as Starbucks (NASDAQ:SBUX) and Dunkin', and in turn, Post's Foodservice segment, especially in higher-margin products like pre-cooked eggs.
Additionally, the analyst highlighted the potential for organic profit growth from the execution of the Nutrish brand relaunch and the enterprise resource planning (ERP) implementation at Weetabix.
The report also suggests that Post Holdings is well-positioned to benefit from strategic capital allocation, including share repurchases and mergers and acquisitions. With debt leverage projected to decrease to the low-4x area and an anticipated $500 million in free cash flow generation in FY25, the company is seen as a top value pick in the Food sector.
In other recent news, Post Holdings reported a robust performance in its fourth-quarter earnings call for the fiscal year 2024. The consumer packaged goods holding company highlighted a 45% increase in adjusted EBITDA over the past two years, with strong contributions from both organic growth and strategic acquisitions, particularly in the pet sector.
Despite a slight 2% decline in consumption volumes, the company generated approximately $1 billion in free cash flow and reduced its net leverage significantly.
Consolidated net sales reached $2 billion, marking a 3% year-over-year increase. Looking ahead, Post Holdings anticipates a more normalized operating environment in FY 2025, with stable inflation but pressured consumer volumes. The company projects adjusted EBITDA for FY 2025 to be between $1.41 billion and $1.46 billion, with capital expenditures ranging from $380 million to $420 million.
These recent developments also include the planned relaunch of the Nutrish brand in early 2025 and the closure of the Lancaster cereal plant to optimize capacity. Despite challenges in managing lower-margin businesses, Post Holdings remains confident in its operating model and growth strategy for 2025.
InvestingPro Insights
Recent data from InvestingPro reinforces the analyst's optimistic outlook on Post Holdings (NYSE:POST). The company's market cap stands at $6.2 billion, with a P/E ratio of 18.8, suggesting a reasonable valuation considering its growth prospects. Post Holdings has demonstrated solid financial performance, with revenue reaching $7.92 billion in the last twelve months as of Q4 2024, representing a 13.33% growth.
InvestingPro Tips highlight that management has been aggressively buying back shares, aligning with the analyst's observation on strategic capital allocation. This approach not only reflects confidence in the company's future but also potentially enhances shareholder value. Additionally, Post Holdings is trading at a low P/E ratio relative to its near-term earnings growth, supporting the analyst's view of the company as a top value pick in the Food sector.
The company's profitability is further underscored by its operating income margin of 10.68% and an EBITDA of $1.28 billion for the last twelve months as of Q4 2024. This financial strength positions Post Holdings well for potential mergers and acquisitions, as mentioned in the analyst report.
For investors seeking more comprehensive insights, InvestingPro offers 5 additional tips for Post Holdings, providing a deeper understanding of the company's potential.
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