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Why Did Post Holdings Acquire National Pasteurized Eggs?

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Price movement

Post Holdings (POST) has a market cap of $5.5 billion. It rose by 0.31% to close at $85.04 per share on September 1, 2016. The stock’s weekly, monthly, and YTD (year-to-date) price movements were -0.12%, -0.55%, and 37.8%, respectively, on the same day.

POST is now trading 0.88% above its 20-day moving average, 0.62% above its 50-day moving average, and 18.2% above its 200-day moving average.

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Related ETF and peers

The iShares Morningstar Mid Core ETF (JKG) invests 0.34% of its holdings in Post Holdings. The ETF tracks a market-cap-weighted index of US midcap firms that exhibit both growth and value characteristics as determined by multifactor selection. The YTD price movement of JKG was 9.9% on September 1.

The market caps of Post Holdings’ competitors are as follows:

  • Kellogg (K): $28.8 billion
  • TreeHouse Foods (THS): $5.4 billion
  • B&G Foods (BGS): $3.2 billion

Latest news on Post Holdings

Post Holdings agreed to acquire National Pasteurized Eggs, a producer of pasteurized shell eggs, which includes all natural, cage-free, and hard boiled eggs. This acquisition is expected to close in fiscal 1Q17.

According to Rob Vitale, Post’s President and Chief Executive Officer, “This transaction continues our effort at building upon Michael Foods’ best-in-class egg foodservice business.”

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Post’s results for fiscal 3Q16

Post Holdings reported fiscal 3Q16 net sales of $1.3 billion, which is a rise of 3.3% over its net sales of $1.2 billion in fiscal 3Q15. Net sales of Post’s consumer, active nutrition, and private brands rose by 21.7%, 1.5%, and 0.88%, respectively, and net sales of its Michael Foods Group fell by 8.3% between fiscal 3Q15 and fiscal 3Q16.

The company’s gross profit margin and operating profit rose by 22.4% and 74.7%, respectively, between fiscal 3Q15 and fiscal 3Q16. It reported adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of $231.0 million in fiscal 3Q16, which is a rise of 23.2% from fiscal 3Q15.

Its net income and EPS (earnings per share) fell to $0.0 million and $0.0, respectively, in fiscal 3Q16, as compared to $19.8 million and $0.33, respectively, in fiscal 3Q15. It reported adjusted EPS of $0.62 in fiscal 3Q16, as compared to $0.27 in fiscal 3Q15.

POST’s cash and cash equivalents and inventories rose by 22.8% and 9.3%, respectively, between fiscal 4Q15 and fiscal 3Q16. Its current ratio rose to 3.2x and its debt-to-equity ratio fell to 2.06x in fiscal 3Q16, as compared to 2.9x and 2.10x, respectively, in fiscal 4Q15.

Projections

The company has made the following projections for fiscal 2016:

  • adjusted EBITDA in the range of $915 million–$925 million
  • capital expenditure in the range of $135 million–$145 million, including ~$15 million related to integration activities and ~$15 million related to growth activities
  • maintenance capital expenditure in the range of $105 million–$115 million

Next, we’ll look at Harley-Davidson (HOG).

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