Pivotal Research Issues a Buy Rating on Post Holdings Inc

By Jason Carr

Pivotal Research analyst Timothy Ramey reiterated a Buy rating on Post Holdings Inc (NYSE: POST) today and set a price target of $105. The company’s shares opened today at $88.40.

Ramey commented:

“Weetabix is said to have sales of £410 million and EBITDA of £120 million, putting the EBITDA margin just over 29% – accretive to Post’s margins, and will be the highest in the Post portfolio. The purchase price is 11.6x EBITDA, or about 10.0x EBITDA post-synergies of £20 million annually – which are expected to come into the P&L over a three-year period. The deal is said to be immediately accretive to Adjusted EBITDA margins and free cash flow. The deal looks attractively priced since it is an adjacency to Post’s U.S. RTE business – this is a cereal company buying a cereal company; we should expect good things to come from that. Post expects to have pro-forma leverage of 5.3x Debt to EBITDA after closing. It expects to borrow £700 million in the U.K. market to fund about half of the deal price and create a natural hedge on the currency exposure. The remainder of the deal will be funded from cash on hand and existing bank facilities.”

According to TipRanks.com, Ramey is a 4-star analyst with an average return of 6.0% and a 60.8% success rate. Ramey covers the Consumer Goods sector, focusing on stocks such as Constellation Brands Inc, Omega Protein Corp, and Brown-Forman B.

Post Holdings Inc has an analyst consensus of Moderate Buy, with a price target consensus of $95.

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Post Holdings, Inc. engages in the manufacturing, marketing, and distribution of branded and private label ready-to-eat cereals products. It operates through the following segments: Post Consumer Brands, Michael Foods Group, Active Nutrition, and Private Brands. The Post Consumer Brands segment involves in the manufacturing, marketing, and selling branded and private label ready-to-eat cereal products. The Michael Foods Group segment includes producing value-added egg products, refrigerated potato products, and cheese and dairy case products. The Active Nutrition segment offers protein shakes, bars and powders and nutritional supplement businesses of Premier Nutrition Corporation and Dymatize Enterprises, LLC, as well as the PowerBar brand. The Private Brands segment deals with the businesses of Golden Boy Foods Ltd. and American Blanching Company, which produce private label peanut, nut butters, dried fruits, and snacking nuts. The company was founded on February 3, 2012 and is headquartered in St. Louis, MO.