Hook / Thesis
Post Holdings is quietly turning a solid run of operating results into real cash flow. Over the last three reported quarters management has delivered improving operating income and repeatable operating cash generation that, in my view, sets up the stock for a potential upside move if EBITDA prints ahead of conservative Street expectations. This is a trade idea, not a stock sermon: the entry, stop and targets below reflect an asymmetric reward-to-risk given the company's current operating cadence and M&A activity.
My thesis in two bullets:
- Operating momentum: sequential improvement in operating income suggests margin stabilization into fiscal 2025 Q3 (period ended 06/30/2025).
- Cash-first strategy: operating cash flow remains a durable source of internal funding and gives Post optionality to integrate acquisitions (and potentially return capital) without immediate balance-sheet stress.
What Post does and why the market should care
Post Holdings is a diversified packaged-foods holding company with four reportable businesses - Post Consumer Brands (cereal, granola, pet food, nut butters), Weetabix (UK cereal and shakes), Foodservice (eggs, potatoes) and Refrigerated Retail (side dishes, eggs, cheese, sausage). The business is largely U.S.-derived and sells through retail, club, drug, mass and foodservice channels.
Why investors should care: Post is a cash-generative consumer staples platform where small improvements in mix, pricing and cost structure flow quickly to operating income and free cash flow. Given the brand portfolio and the company’s demonstrated ability to add tuck-ins (the 8th Avenue deal announced 06/04/2025 for $880 million), upside to EBITDA from synergies and better-than-expected margin leverage is a realistic catalyst.
Recent performance that supports the trade
Look at the last three quarterly snapshots (fiscal 2025):
| Quarter (end) | Revenues (USD) | Gross Profit (USD) | Operating Income (USD) | Net Cash Flow from Ops (USD) |
|---|---|---|---|---|
| 06/30/2025 | 1,984,300,000 | 596,200,000 | 234,600,000 | 225,900,000 |
| 03/31/2025 | 1,952,100,000 | 545,800,000 | 182,200,000 | 160,700,000 |
| 12/31/2024 | 1,974,700,000 | 595,300,000 | 214,100,000 | 310,400,000 |
Sequentially, operating income rose to $234.6 million in the quarter ended 06/30/2025 (filed 08/08/2025), up from $182.2 million in the prior quarter. Gross profit was roughly flat versus the December quarter and meaningfully higher than the March quarter. Importantly, operating cash flow remained positive and sizable: $225.9 million in the June quarter after $160.7 million the prior quarter and $310.4 million in December.
Net income in the most recent quarter was $108.7 million and diluted EPS was $1.79 on roughly 62.4 million diluted average shares - indicating decent per-share earnings power alongside improving operational cash conversion.
Valuation and balance sheet framing
The dataset does not provide a live market-cap snapshot, but recent trading has been in the high‑$90s per share. Using the most recent quarter’s diluted average share count (about 62.4 million) and a recent close near $99, a back-of-the-envelope market-cap is in the neighborhood of $6.1–6.3 billion. This is an estimate and should be treated accordingly.
On the balance sheet the company reports total assets of $13.37 billion and total liabilities of $9.36 billion (period ended 06/30/2025). Noncurrent liabilities are material (about $8.34 billion), so the market rightly watches leverage ratios and interest expense (interest expense was $88.5 million in the most recent quarter). Nevertheless, Post’s recurring operating cash flow gives it flexibility to fund acquisitions and support integration without obvious near-term liquidity stress.
Relative valuation: Peer comps were not provided in a focused CPG set inside the dataset, so valuation must be read through the lens of cash flow yield and leverage. If the market-cap estimate above is directionally correct, then a mid-single-digit cash-flow yield (given quarterly OCF of $225.9M annualized is ~ $900M) would imply a reasonable multiple relative to stable CPG peers - and leaves room for rerating if EBITDA or free cash flow prints above expectations.
Catalysts
- 8th Avenue acquisition (06/04/2025) - a $880 million tuck-in that expands Post’s grocery and private-label footprint. Successful integration generates incremental EBITDA and cost synergies.
- Quarterly cadence / earnings beats - the company has demonstrated the ability to lift operating income; another quarter of sequential improvement could produce an EBITDA surprise.
- Cash-flow re-rating opportunity - consistent OCF near the high hundreds of millions could shift investor focus from leverage to free-cash conversion and capital returns (buybacks/debt paydown).
- Operational productivity - pack/route optimization, pricing and mix (premium cereals, pet food, refrigerated offerings) can flow more directly to EBITA than revenue growth alone.
Trade plan (actionable)
Base case (my trade):
- Trade: Long POST
- Entry: $98–102 (work limit orders in that band; recent closes are near $99)
- Stop: $89 (cuts loss to roughly 9–10% below entry band; place stop slightly below $90 to allow intraday noise)
- Targets:
- Near-term target: $115 (about 15–18% upside from entry)
- Secondary target: $130 (about 30%+ upside; for position traders or if an EBITDA / cash flow beat arrives)
- Size: Position size per risk tolerance; with a $10 stop per $100 entry, risk = ~10% of position value. Keep position to a level consistent with a medium-risk allocation.
Rationale: the stop is tight enough to protect capital if operating momentum reverses, while targets reflect realistic re-rating scenarios if cash flow and EBITDA show upside or if integration synergies from recent M&A start to hit the P&L.
Risks and counterarguments
Always balance the bull case with credible downsides. Key risks I see:
- Leverage and rising interest expense - noncurrent liabilities are large (~$8.34 billion); interest expense in recent quarters has been significant (Q3 interest expense ~$88.5 million). If rates stay higher-for-longer or debt costs increase, free cash flow could be materially constrained.
- M&A execution risk - the 8th Avenue purchase ($880M) expands scale but integration missteps or weaker-than-expected synergies would compress near-term margins and delay the anticipated EBITDA upside.
- Commodity / input cost pressure - food ingredients and packaging costs can swing quickly. A reversal in mix or a surge in input inflation would hit gross margins and operating income.
- Channel and volume risk - grocery and foodservice volumes are sensitive to retail inventory dynamics and consumer demand. Volume decline or persistent trade destocking could force incremental promotional activity and margin erosion.
- Near-term dilution or capital allocation choices - if the company attracts shareholder pressure to prioritize buybacks while keeping leverage high, that could increase downside if a macro shock hits cash flow.
Counterargument (what the bearish case argues): Skeptics will say the headline operating income improvements are tidy but not durable given cyclical commodity exposure and leverage. They will point to elevated noncurrent liabilities and rising interest expense as reasons to avoid the name until net debt is visibly reduced and integration risk is proven away.
What would change my mind
- If operating cash flow meaningfully deteriorates (two consecutive quarters of declining OCF vs recent quarterly averages), I would close the position and reassess fundamentals.
- If interest expense accelerates or the company issues equity or materially dilutes shareholders to fund M&A, I would step back because that alters the risk/reward calculus.
- Conversely, a clear commitment to deleveraging or a string of EBITDA beats with visible, quantifiable synergies from 8th Avenue would make me more aggressive and potentially raise price targets.
Conclusion
I remain bullish on Post Holdings for tactical traders and patient position holders who can stomach medium-term M&A and leverage risk. The operating-income trajectory (Q1 214.1M, Q2 182.2M, Q3 234.6M) and recurring operating cash flow (Q3 OCF $225.9M after a prior quarter of $160.7M and a stronger $310.4M) argue the company is converting underlying profitability into cash. If the market begins to reward that conversion - and if the 8th Avenue acquisition produces measurable synergies - the probability of an upside EBITDA surprise is non-trivial.
Trade plan recap: enter $98–102, stop under $89, targets $115 and $130. Risk is real; size positions accordingly. I’ll be watching the next set of quarterly results closely for signs that operating cash flow and EBITDA are both accelerating beyond consensus.
Disclosure: This is an actionable trade idea for educational purposes and not personalized investment advice. Investors should confirm current prices, position sizing and their own risk tolerances before trading.
Relevant filings / dates referenced
- Quarter ended 06/30/2025 - filing date 08/08/2025
- Quarter ended 03/31/2025 - filing date 05/09/2025
- Quarter ended 12/31/2024 - filing date 02/07/2025
- News: 8th Avenue acquisition announced 06/04/2025