Zacks Investment Research downgraded
Post Holdings Inc.
) to a Zacks Rank #5 (Strong Sell) on March 19 after the company
announced a soft guidance for certain items for fiscal 2014.
Why the Downgrade?
On Mar 10, this cereal maker revised its guidance for fiscal
2014. Post Holdings now expects fiscal 2014 adjusted EBITDA to be
between $300 and $320 million, lower than the previous guidance
of $315 million-$340 million provided during the first quarter
fiscal 2014 conference call.
The new guidance includes the partial-year expected results of
Dakota Growers as well as Golden Boy Foods Ltd. and Dymatize
Enterprises, LLC (both acquired in Feb 2014) but excludes
the pending acquisition of PowerBar and Musashi brands from
Nestle S.A. (announced in Feb 2014).
The lowered guidance reflects an expected increase in merger
and acquisition costs, including increased audit fees for pending
or completed acquisitions, due diligence fees on abandoned
acquisitions, outside service fees related to IT integrations,
and increased employee costs. The company also experienced volume
decline in late 2013 and early 2014 at Dakota Growers Pasta
Company (acquired in Jan 2014). The company expects the softness
in the ready-to-eat ('RTE') cereal category to persist in the
second quarter of fiscal 2014 and as a result lowered the fiscal
Management expects to prudently regularize integration costs
and additional merger costs over the near term. It expects volume
at Dakota Growers to return to historical levels by 2015 as it
has a strong pipeline for the near term. Post Holdings expects
the RTE cereal category to grow in single digits in 2015.
However, the company's EBITDA will decline in fiscal 2014.
This food company witnessed sharp downward estimate revisions
after the announcement of the revised guidance. The Zacks
Consensus Estimate declined 18% for fiscal 2014 and 13.9% for
fiscal 2015 over the past 7 days.
Other Stocks to Consider
Not all stocks are performing as poorly as Post Holdings.
Better-ranked food companies in the consumer staples sector
Diamond Foods Inc.
Inventure Foods, Inc.
J&J Snack Foods Corp.
), all of them holding a Zacks Rank #2 (Buy).
DIAMOND FOODS (DMND): Free Stock Analysis
J&J SNACK FOODS (JJSF): Free Stock Analysis
POST HOLDINGS (POST): Free Stock Analysis
INVENTURE FOODS (SNAK): Free Stock Analysis
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