Post Holdings Upped to Strong Buy - Analyst Blog

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Zacks Investment Research upgraded Post Holding Inc ( POST ) to a Zacks Rank #1 (Strong Buy) on Jan 17, driven by back-to-back acquisitions announced in the recent past.

Why the Upgrade?

On Jan 2, this cereal maker completed the acquisition of private label pasta manufacturer Dakota Growers Pasta Company, Inc. for $370 million. The company has plans to create a unit, combining Dakota Growers and Golden Boy Foods Ltd., whose acquisition was announced in Dec 2013.

Golden Boy is a North American manufacturer of private label peanut and other nut butters, as well as dried fruit, baking and snacking nuts. Golden Boy is a key supplier to the U.S. and Canadian retail and foodservice channels. Post Holdings has agreed to pay Canadian $320 million for Golden Boy on a cash-free, debt-free basis and the transaction is expected to be complete in Feb 2014.

The company believes that the combination of Dakota Growers and Golden Boy will bear fruits as it will beef up the company's private label products of both Dakota Growers and Golden Boy as well as expand the active nutrition categories of the company. The combined unit will have annual net sales in excess of $500 million.

In Dec 2013, Post Holdings also agreed to buy privately owned Dymatize for $380 million, along with the announcement of Golden Boy acquisition. The Dymatize deal is also expected to close in Feb 2014 and includes a contingent payment of up to $17.5 million.

Dymatize manufactures and markets premium protein powders, bars and nutritional supplements under the Dymatize and Supreme Protein brands. The acquisition of Dymatize comes three months after Post Holdings bought the branded food and beverage business of Premier Nutrition Corp., a maker of products like vanilla shakes.

Post Holdings believes that adding Dymatize to its business would enable it to serve a different set of customers compared to the former Premier Nutrition Corp. assets. Dymatize supplies speciality U.S. stores, plus food, drug and mass merchandise outlets. Premier sells into club stores, as well as the food, drug and mass channels.

The company has been concentrating on active nutrition and private label since the last one year in order to transform the company from a low-growth, single-category participant to a more diversified consumer products enterprise, with a better product portfolio and stronger participation in retail channels and categories. The acquisition of Attune Foods (in Jan 2013) and the Hearthside's Golden Temple granola business (May 2013) provided entry into the natural specialty channels, where natural and organic cereals are experiencing high single-digit growth.

This food company witnessed sharp upward estimate revisions after announcing the completion of acquisition. Most of the estimates for fiscal 2014 and fiscal 2015 increased over the past 30 days.

Other Stocks to Consider

Other stocks in the consumer staples sector worth considering include Pinnacle Foods Inc. ( PF ), ConAgra Foods Inc. ( CAG ) and Green Mountain Coffee Roasters Inc ( GMCR ), all of them holding a Zacks Rank #2 (Buy).



CONAGRA FOODS (CAG): Free Stock Analysis Report

GREEN MTN COFFE (GMCR): Free Stock Analysis Report

PINNACLE FOODS (PF): Free Stock Analysis Report

POST HOLDINGS (POST): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: CAG , GMCR , PF , POST

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