Post (POST)

Packaged foods company Post (NYSE:POST) missed Wall Street’s revenue expectations in Q1 CY2025, with sales falling 2.3% year on year to $1.95 billion. Its non-GAAP profit of $1.41 per share was 16.7% above analysts’ consensus estimates.

Company Overview

Founded in 1895, Post (NYSE:POST) is a packaged food company known for its namesake breakfast cereal and healthier-for-you snacks.

As America industrialized and moved away from an agricultural economy, people faced more demands on their time. Packaged foods emerged as a solution offering convenience to the evolving American family, whether it be canned goods or snacks. Today, Americans seek brands that are high in quality, reliable, and reasonably priced. Furthermore, there's a growing emphasis on health-conscious and sustainable food options. Packaged food stocks are considered resilient investments. People always need to eat, so these companies can enjoy consistent demand as long as they stay on top of changing consumer preferences. The industry spans from multinational corporations to smaller specialized firms and is subject to food safety and labeling regulations.

Competitors in the packaged food space and specifically in breakfast cereals include General Mills (NYSE:GIS), Kellogg (NYSE:K), and Kraft Heinz (NASDAQ:KHC).

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can put up a good quarter or two, but many enduring ones grow for years.

With $7.88 billion in revenue over the past 12 months, Post is one of the larger consumer staples companies and benefits from a well-known brand that influences purchasing decisions.

As you can see below, Post grew its sales at a solid 13.8% compounded annual growth rate over the last three years despite consumers buying less of its products. We’ll explore what this means in the "Volume Growth" section.

This quarter, Post missed Wall Street’s estimates and reported a rather uninspiring 2.3% year-on-year revenue decline, generating $1.95 billion of revenue.

Looking ahead, sell-side analysts expect revenue to grow 1.2% over the next 12 months, a deceleration versus the last three years. This projection is underwhelming and suggests its products will face some demand challenges.

Revenue growth can be broken down into changes in price and volume (the number of units sold). While both are important, volume is the lifeblood of a successful staples business as there’s a ceiling to what consumers will pay for everyday goods; they can always trade down to non-branded products if the branded versions are too expensive.

Post’s average quarterly sales volumes have shrunk by 4.6% over the last two years. This decrease isn’t ideal because the quantity demanded for consumer staples products is typically stable.

In Post’s Q1 2025, sales volumes dropped 4.9% year on year. This result represents a further deceleration from its historical levels, showing the business is struggling to move its products.

All else equal, we prefer higher gross margins because they make it easier to generate more operating profits and indicate that a company commands pricing power by offering more differentiated products.

Post’s gross margin is slightly below the average consumer staples company, giving it less room to invest in areas such as marketing and talent to grow its brand. As you can see below, it averaged a 28.7% gross margin over the last two years. Said differently, for every $100 in revenue, a chunky $71.26 went towards paying for raw materials, production of goods, transportation, and distribution.

Post’s gross profit margin came in at 28% this quarter, down 1 percentage points year on year and missing analysts’ estimates by 1.1%. On a wider time horizon, the company’s full-year margin has remained steady over the past four quarters, suggesting its input costs (such as raw materials and manufacturing expenses) have been stable and it isn’t under pressure to lower prices.

Post has done a decent job managing its cost base over the last two years. The company has produced an average operating margin of 9.6%, higher than the broader consumer staples sector.

Looking at the trend in its profitability, Post’s operating margin might fluctuated slightly but has generally stayed the same over the last year. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

This quarter, Post generated an operating profit margin of 9.3%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.

We track the change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Post’s EPS grew at an astounding 103% compounded annual growth rate over the last three years, higher than its 13.8% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

In Q1, Post reported EPS at $1.41, down from $1.51 in the same quarter last year. Despite falling year on year, this print easily cleared analysts’ estimates. Over the next 12 months, Wall Street expects Post’s full-year EPS of $6.20 to grow 14.5%.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

Post has shown impressive cash profitability, giving it the option to reinvest or return capital to investors. The company’s free cash flow margin averaged 7.2% over the last two years, better than the broader consumer staples sector.

Taking a step back, we can see that Post’s margin dropped by 1.7 percentage points over the last year. If its declines continue, it could signal increasing investment needs and capital intensity.

Post’s free cash flow clocked in at $70.2 million in Q1, equivalent to a 3.6% margin. The company’s cash profitability regressed as it was 4 percentage points lower than in the same quarter last year, suggesting its historical struggles have dragged on.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Post historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 6%, somewhat low compared to the best consumer staples companies that consistently pump out 20%+.

Post reported $617.6 million of cash and $6.95 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $1.35 billion of EBITDA over the last 12 months, we view Post’s 4.7× net-debt-to-EBITDA ratio as safe. We also see its $148 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

It was encouraging to see Post beat analysts’ EBITDA expectations this quarter. We were also happy its EPS outperformed Wall Street’s estimates. On the other hand, its revenue slightly missed and its gross margin fell slightly short of Wall Street’s estimates. Overall, this print was mixed but still had some key positives. The stock remained flat at $110.86 immediately after reporting.

Updated: May 22, 2025 at 10:42 PM EDT

Are you wondering whether to buy Post or pass? We urge investors to not only consider the latest earnings results but also longer-term business quality and valuation as well.

Post isn’t a terrible business, but it isn’t one of our picks. Although its revenue growth was good over the last three years, it’s expected to deteriorate over the next 12 months and its shrinking sales volumes suggest it’ll need to change its strategy to succeed. And while the company’s EPS growth over the last three years has been fantastic, the downside is its relatively low ROIC suggests management has struggled to find compelling investment opportunities.

Post’s P/E ratio based on the next 12 months is 15.2x. Beauty is in the eye of the beholder, but we don’t really see a big opportunity at the moment. We're pretty confident there are more exciting stocks to buy at the moment.

Wall Street analysts have a consensus one-year price target of $127.19 on the company (compared to the current share price of $107.94).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.

Want to invest in a High Quality big tech company? We’d point you in the direction of Microsoft and Google, which have durable competitive moats and strong fundamentals, factors that are large determinants of long-term market outperformance.

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