Acquisitions Drive Growth at Post Holdings Inc

Markets Motley Fool

On Friday, before the market opened, Post Holdings Inc (NYSE: POST) reported a significant improvement in revenue and earnings during the fourth quarter. 

Continue Reading Below

Acquisitions continue to drive growth for the company, a trend that will likely continue in the next year. Here's a look at the financial highlights and what to expect in the future

Post Holdings: The raw numbers

Metric Q4 2017 Q4 2016 Year-Over-Year Change
Sales $1.45 billion $1.26 billion  14.9% 
Net income $10.9 million  ($40.4 million)  N/A
Diluted EPS $0.16  ($0.58)  N/A

What happened with Post Holdings this quarter? 

The headline numbers are important, but it's the segment results that tell more about how the business is doing . Here's a look at the highlights. 

Continue Reading Below

  • Pro forma sales, which account for the acquisitions of Weetabix and National Pasteurized Eggs, were up 1.4%. 
  • A jump in gross margin drove the increase in net income during the quarter. Gross profit margin was up to 30.2% of sales from 29.9% of sales a year ago. That may seem like a small change, but when net margin is less than 1%, it's a meaningful change. 
  • Post Consumer Brands sales were up 4% to $492.2 million, although pro forma net sales were down 2.9%. Segment operating profit rose from $81.1 million a year ago to $86.5 million. 
  • Michael Food Group sales were up 2.8% to $537.2 million and segment profit jumped from $40.6 million a year ago to $61.0 million. 
  • Active Nutrition sales were up 21.6% to $193.3 million and segment profit jumped nearly ten-fold to $22.3 million. 
  • Private Brands sales were up 6.9% to $113.4 million and segment profit increased from $7.4 million to $10.9 million in the quarter. 
  • Weetabix sales were $112.4 million, up 5% on a pro forma basis, and segment profits were $14.5 million. 
  • During the quarter, Post Holdings repurchased 4 million shares for $317.7 million, or $79.51 per share. 
  • The acquisition of Bob Evans Farms was announced on Sept. 19, 2017, and is expected to close in the first calendar quarter of 2018. 

What management had to say and looking forward

Slow and steady financial improvement is what investors should hope for. Here's how management thinks the next fiscal year looks:

Post management expects fiscal year 2018 Adjusted EBITDA to range between $1.14-$1.18 billion, exclusive of the pending acquisition of Bob Evans, with modest sequential quarterly growth throughout fiscal year 2018.

This compares to $989.1 million of adjusted EBITDA for fiscal 2017, so the expectation is for a continued financial recovery. 

Some of the headwinds from egg prices that have hurt earnings in the past seem to be behind Post Holdings. And with organic growth combining with acquisitions to drive both top- and bottom-line improvement, the future looks just a little brighter for the company. 

10 stocks we like better than Post Holdings
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Post Holdings wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of November 6, 2017

Travis Hoium has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Post Holdings. The Motley Fool has a disclosure policy.