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Consumer packaged goods maker Post (POST -2%), which derives most of its revenue through cereal and pet food, quickly went stale today despite surpassing top and bottom-line forecasts in Q4 (Sep). Shares did initially creep higher on energetic Q4 numbers. However, enthusiasm quickly diminished out of the gate today.

A broader market pullback is one factor weighing on the stock. Another factor is the constant adjusted volume declines across most of POST's segments during the quarter, which may be starting to test investors' patience. When excluding one-time benefits, most segments outside Foodservice saw yr/yr volume compression almost every quarter in FY24.

However, this may not be entirely surprising, as management has conveyed that it focuses more on EBITDA and capital allocation. Still, POST cannot sustain persistent volume declines over the long term. The company noted today that it will continue to aggressively manage its lower margin businesses and not worry about volume reduction, expressing confidence that trends will start to rebound over time as it optimizes its footprint.

• POST's profitability and capital allocation strategy continue to bear fruit. In Q4, the company registered its eighth straight quarter of double-digit earnings upside. While adjusted EBITDA did remain flat yr/yr in Q4, on a two-year stack, POST has delivered a 45% uptick in the metric, half resulting from organic growth and the other half from acquisitions. POST has leveraged these gains into robust free cash flow, generating around $1.0 bln over that timeframe, giving POST the capacity to target M&A opportunities.
• M&A has been vital to POST's steady yr/yr revenue growth over the past two quarters despite lapping periods of over +20% growth. In Q4, sales inched 3.3% higher yr/yr to $2.01 bln. Post Consumer Brands, comprised of cereal and pet food, grew by 3.9% to $1.05 bln due to POST's $235 mln acquisition of Perfection Pet Foods, which kept revs from slipping by 2.7%. This dynamic was prevalent in Weetabix, POST's U.K. banner, which recorded positive growth due to its Deeside purchase and FX benefits.
  • In Refrigerated Retail, which includes side dishes, egg, cheese, and sausage products, sales fell by 2.9%. However, the segment delivered a 0.7% volume bump, aided by side dishes and sausage growth.
• Foodservice was the star in Q4, touting a 4.7% sales improvement on a 3.6% uptick in volumes, driven by distribution gains in eggs and potatoes. This segment has been a steady grower for POST throughout the year, and management expects this to carry through to FY25. Speaking of which, POST outlined its adjusted EBITDA goal for FY25, projecting $1.41-1.46 bln, a 2.3% improvement yr/yr.

POST's Q4 report reflected management's attention to enhancing profitability, controlling what it can in a challenged economic environment where restaurant traffic continues to pull back and inflation still hurts the end consumer. Without a more favorable demand backdrop, POST's adjusted revenue growth may stall over the near term. However, the company has done a solid job preserving margins and bolstering its balance sheet, providing the fuel needed to navigate a tricky economy.