Barclays on U.S. Food: ConAgra (CAG) and Ralcorp (RAH): We're Moving On
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Price: $16.27 +0.31%
Rating Summary:
3 Buy, 17 Hold, 5 Sell
Rating Trend:
Down
Today's Overall Ratings:
Up: 12 | Down: 15 | New: 40
Rating Summary:
3 Buy, 17 Hold, 5 Sell
Rating Trend:
Down
Today's Overall Ratings:
Up: 12 | Down: 15 | New: 40
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Barclays on U.S. Food: ConAgra (NYSE: CAG) and Ralcorp (NYSE: RAH): We're Moving On
Barclays analyst, Andrew Lazar, says, "At the end of the day, we believe RAH was hesitant to sell the company at a time when its own Post business has been underperforming, both businesses have seen the lag between pricing and input cost inflation, and market multiples remain depressed."
"In short, while it's true that RAH's Chairman of the Board, Bill Stiritz, has a track record of creating value for shareholders that is certainly enviable, he may have his work cut out for him this time, as most companies expect a continuation of some of the above factors for the next several years, per commentary at our recent Back to School Conference. But, as RAH's release says, "nothing is off the table" in terms of strategies to create value and Mr. Stiritz will be with Post for "as long as it takes"."
"In terms of next steps for RAH, we would expect the company to file its Form 10 related to the spin of Post within the next several days, which we expect to contain historical data for Post as a separate business (including its cash-flow and margin profiles). Following the filing of the Form 10, we would expect an announcement around management at Post (sometime in October, we think), followed by RAH's fiscal 4Q11 results on Nov 8. Immediately after, we'd expect RAH to go on the road to talk with investors about the go-forward prospects for the core private-label business. So too do we expect the new Post management team to begin to tell its story to investors as well. In our view, though it may be daunting for a new management team to hit the road and see investors shortly after taking the helm, we believe it is imperative for Post's leadership to tell its story as soon as possible given the special circumstances around the spin/RAH's rejection of CAG's offer."
"With RAH shares already trading in the low $70's, we believe we are at the point where long-term investors are likely to take notice. Our sum-of-the-parts math continues to point to a standalone value for the company in the low $80s."
Barclays analyst, Andrew Lazar, says, "At the end of the day, we believe RAH was hesitant to sell the company at a time when its own Post business has been underperforming, both businesses have seen the lag between pricing and input cost inflation, and market multiples remain depressed."
"In short, while it's true that RAH's Chairman of the Board, Bill Stiritz, has a track record of creating value for shareholders that is certainly enviable, he may have his work cut out for him this time, as most companies expect a continuation of some of the above factors for the next several years, per commentary at our recent Back to School Conference. But, as RAH's release says, "nothing is off the table" in terms of strategies to create value and Mr. Stiritz will be with Post for "as long as it takes"."
"In terms of next steps for RAH, we would expect the company to file its Form 10 related to the spin of Post within the next several days, which we expect to contain historical data for Post as a separate business (including its cash-flow and margin profiles). Following the filing of the Form 10, we would expect an announcement around management at Post (sometime in October, we think), followed by RAH's fiscal 4Q11 results on Nov 8. Immediately after, we'd expect RAH to go on the road to talk with investors about the go-forward prospects for the core private-label business. So too do we expect the new Post management team to begin to tell its story to investors as well. In our view, though it may be daunting for a new management team to hit the road and see investors shortly after taking the helm, we believe it is imperative for Post's leadership to tell its story as soon as possible given the special circumstances around the spin/RAH's rejection of CAG's offer."
"With RAH shares already trading in the low $70's, we believe we are at the point where long-term investors are likely to take notice. Our sum-of-the-parts math continues to point to a standalone value for the company in the low $80s."
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