Post Holdings is Monday's IBD Stock Of The Day. The eggs, potato, cereal and pet food company has served up comfort food for investors amid the Trump tariffs sell-off. Post shares, though sliding on Monday, have largely held their ground as the S&P 500 has tumbled nearly 20% since Feb. 19.
Post's relative strength line, the blue line in IBD charts that tracks a stock's progress vs. the S&P 500, has surged to a two-year high in recent days.
Many grocery categories stand to face price increases due to Trump tariffs. Among them are fresh fruit, seafood, coffee, cheese, rice and some beef. Post Holding said in its Feb. 7 fiscal Q1 earnings call that it didn't raise the top range of its earnings outlook due to risk from avian flu and Trump tariffs.
The company already anticipated a headwind of $30 million to $50 million in the current quarter. That is related to two third-party suppliers being hit with avian flu outbreaks in December. Subsequently, the Trump administration came up with a plan to lower egg prices with imports from South Korea and Turkey.
Yet both countries are in line to be hit with Trump tariffs, with Turkey getting the minimum 10% and South Korea 26%.
Eggs accounted for 26% of sales in Q1. Still, Post Holdings' full menu of products suggests a limited hit. The Post consumer brands business, including cereal, peanut butter and pet food accounts for 49% of sales. Its UK-based Weetabix business, the country's top cereal brand and top provider of private label biscuits, makes up 6% of sales. Bob Evans Farms and Simply Potatoes make up much of the remaining 19% of sales.
Post Holdings Strategy Amid Trump Tariffs
The St. Louis-based company says it operates like a publicly traded private equity firm. As an example, the company acquired brands including PowerBar in a series of deals over the 13 months to October 2014. Five years later, those acquisitions were spun off as BellRing. Post says its $450 million investment yielded more than 30% per year. That allowed it to distribute over $2 billion in BellRing shares to Post shareholders and retire $2 billion in debt by 2022.
The company doesn't pay dividends, opting to return capital to shareholders "via aggressive share buybacks."
Post Stock
Post fell more than 2% to below 115 in Monday afternoon stock market action. The company is part of the consumer nondiscretionary sector that provides defensive characteristics for investors when the risk of recession is elevated. Economists believe that is the case after the latest escalation of Trump tariffs.
Post found support at its 50- and 200-day moving averages on Monday, an encouraging sign. The stock has a 125.84 buy point from a cup base, but it could be in the process of forming a handle with a 119.85 buy point.
Be sure to read IBD's The Big Picture column after each trading day to get the latest on the prevailing stock market trend and what it means for your trading decisions. In the current environment, investors are advised to wait for a follow-through day to signal a potential turn in market conditions for the better.
