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Post Holdings Inc. (NYSE:POST) continues to transform its business from low-margin markets in decline to higher-margin markets through acquisitions. And recently reported fiscal-third-quarter results show some positive steps for the company. Here are a few key points investors should take away from the earnings report.  

Post Holdings Inc. results: The raw numbers


Q3 2016 Actuals

Q3 2015 Actuals

Growth (YOY)


$1,246.1 million

$1,211.8 million


Net income


$19.8 million


Adjusted earnings per share




Data source: Post Hodlings earnings release.

What happened with Post Holdings Inc. this quarter?

On the surface, it looks like growth is slow and profitability is in a massive decline. But when you peel back the numbers, a different story unfolds. Here are a few metrics showing how acquisitions are driving growth and growing margins, and how one-time items impacted results:

  • The increase in sales was driven by the acquisitions of MOM Brands and Willamette Egg Farms. Organically, sales were actually down 4.1% in the quarter.
  • Post consumer brands sales were up 21.7%, to $434.5 million, compared to the same period last year, while Michael Foods sales fell 8.3%, to $518.0 million. The decline at Michael Foods is what drove the decline in organic sales during the quarter.
  • Organic sales may have declined, but the focus on stronger brands is helping margins. Gross profit rose 25.8% to $398.2 million in the quarter, and operating profit was up 74.7% to $142.0 million. So higher-margin sales are giving the bottom line more leverage if it weren't for one-time items.
  • The decline in net income was driven by a non-cash mark-to-market adjustment on interest rate swap contracts of $62.6 million, compared to a $41.9 million gain in the previous year. These mark-to-market adjustments can be volatile from quarter to quarter, so operating income growth, highlighted above, is probably a better metric to watch in the long term.

What management had to say

Management said that some short-term challenges in the egg business are starting to normalize as repopulation continues after last year's avian influenza outbreak. And with customers trending toward higher-margin products, there's upside in operating income for Michael Foods.  

They also said the adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) guidance of $915 million to $925 million was still in place for the year.

Looking forward

Investors should keep an eye on the growth trends of acquired businesses for the rest of the year and pay attention to continued operating margin trends. Post Holdings has done a good job refocusing on the higher-margin businesses, where it has differentiation, and divesting from lower-margin businesses in recent years. And in the long term, that should help drive the bottom line higher even if sales grow only by low single digits, as they did this quarter.

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