Monday, June 21, 2010

Ralcorp Mumbo Jumbo Guidance

Ralcorp (RAH) updates guidance with a mumbo jumbo press release. EPS for Q3 are dropping from last years $1.31@ share to today’s reality of $1.00. Good thing they could keep it above the psychological dollar level. But check this wording out for the reasons:

“Principal factors contributing to this downward estimate can be attributed to cereal category dynamics including lower returns on promotional spending at Post Foods and the impact of branded competition on private label cereal results at Ralston Foods.”

Bolding and italics are mine.

The company failed to execute. The promotional spend failed to deliver. The impact of brand on private label is not completely clear. This sentence would not work with a flinty eyed board of directors. Why was it dished up to investors?

So the expectations guidance dropped the stock some 6% in one day when it was trading at the upper end of its 52 week range. Has management been speaking clearly?

Disclosure: No position in any stocks mentioned in this post.