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KeyBanc Starts Post Holdings At Overweight, $90 Target

KeyBanc Starts Post Holdings At Overweight, $90 Target
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KeyBanc has initiated coverage of Post Holdings Inc (NYSE: POST) with an Overweight rating and $90 price target, saying it has the "most upside potential (20 percent) due to several unique earnings drivers."

St. Louis, Missouri-based Post Holdings is a consumer packaged goods holding company. The company operates through four segments, namely, Post Consumer Brands, Michael Foods Group, Active Nutrition and Private Brands.

Business, Infrastructure Mix

Analyst Brett Andress said the company's infrastructure and business mix are driving scale, in addition to improving free cash flow.

"We believe these dynamics combined with several segment-specific catalysts should conservatively clear a path to just under $1 billion in organic EBITDA over the next three years (ex-M&A)," Andress wrote in a note.

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MOM Brands Acquisition

Further, the analyst highlighted the potential $25 million synergy upside from its acquisition of MOM Brands. Andress expects synergies of $100+ million (versus company target of $75 million), given the identical nature of the MOM and POST legacy cereal businesses, driving solid mid-20 percent plus in segment margins.

Looking Forward

Meanwhile, Andress noted that Post Holdings has enough firepower to easily drive mid-teens segment margins over the next several years in its Active Nutrition segment.

"While ~7 percent of EBITDA currently, we see this segment as one of POST's main acquisition vehicles going forward once stabilized," the analyst elaborated.

Andress also highlighted that Michael Foods unit will be POST's primary long-term driver of shareholder value given its "highly scalable model and market-leading exposure to value-added egg products, favorable foodservice dynamics and on-trend consumer preferences (protein)."

"We note that investors are signing up for a best-in-class management team with an appetite for leverage and continued M&A (sitting on $870 million cash), raising POST's relative risk profile," Andress added.

Shares of Post Holdings closed Thursday's regular trading session at $76.76 and were trading down 0.27 percent in Friday's pre-market session.

Latest Ratings for POST

Sep 2016BMO CapitalDowngradesOutperformMarket Perform
Jun 2016BB&T CapitalUpgradesHoldBuy
May 2016KeyBancInitiates Coverage onOverweight

View More Analyst Ratings for POST
View the Latest Analyst Ratings

Posted-In: KeyBancAnalyst Color Long Ideas Price Target Initiation Analyst Ratings Trading Ideas


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