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On Wednesday, Piper Sandler maintained a positive stance on Post Holdings (NYSE:POST), reiterating an Overweight rating and a price target of $140.00. According to InvestingPro data, the company currently trades at a P/E ratio of 17.5x and has demonstrated strong profitability with an EBITDA of $1.3 billion over the last twelve months. The stock appears to be trading below its Fair Value based on comprehensive analysis. The optimism from the firm stems from the potential upside to Post Holdings’ second fiscal quarter of 2025 earnings before interest, taxes, depreciation, and amortization (EBITDA) due to the recent drop in egg prices.
The analyst at Piper Sandler noted that the decline in egg prices in March provided a boost to Post Holdings’ financial results for the month, which could lead to surpassing the previously estimated EBITDA. Initially, it was anticipated that Post Holdings might face an EBITDA headwind of $30-50 million in the second fiscal quarter due to high egg costs. However, the situation appears to have improved, with the analyst now considering the company’s estimated EBITDA of around $315 million for the quarter to be conservative, suggesting that the consensus estimate of approximately $329 million might be more accurate. InvestingPro reveals that three analysts have recently revised their earnings estimates upward for the upcoming period, with the company’s next earnings report scheduled for May 8, 2025.
Egg prices have continued to stabilize into April, showing a significant decrease of 46% compared to the second fiscal quarter, marking the lowest level in five months. This trend suggests potential further positive impacts on the company’s financials for the third fiscal quarter of 2025.
Post Holdings’ Pet and Cereal segments are also expected to benefit as consumers look for more budget-friendly options. The Pet segment faces some challenges, including mix shifts and total distribution points (TDP) losses. However, the ongoing relaunch of the Nutrish brand is anticipated to contribute positively. Assuming the Nutrish brand refresh is successful, Post Holdings is on course to meet its full-year financial outlook, with analysts forecasting EPS of $7.17 for fiscal year 2025.
In other recent news, Post Holdings reported its fourth-quarter 2024 earnings, revealing an earnings per share (EPS) of $1.73, which surpassed the forecast of $1.55. However, revenue came in slightly below expectations at $2 billion, compared to the anticipated $2.01 billion. Despite the revenue miss, the company’s strong operational results were highlighted, with a 9% growth in EBIT to €207 million and an EBITDA margin of 13.5%. Concurrently, Post Holdings announced the closure of two cereal manufacturing facilities in Cobourg, Ontario, and Sparks, Nevada, as part of a strategy to optimize production capacity in response to the declining ready-to-eat cereal market. This decision will affect approximately 300 employees and is expected to result in annual cost savings of $21 to $23 million starting in fiscal year 2026, despite incurring pre-tax charges of $63.5 to $67.5 million. Additionally, Barclays (LON:BARC) maintained its Overweight rating on Post Holdings, with a price target of $125, citing the company’s strategic focus on cash flow and capital allocation as strengths amid weak food industry trends. These developments underscore Post Holdings’ efforts to navigate industry challenges and maintain financial stability.
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