US Foods (USFD), the second-largest wholesaler food distributor in the country, hasn’t fared all that well since my last update. Down about 15% since then, the pandemic was an obvious unexpected adverse event, but Sysco (SYY) and Performance Food Group (PFGC) have fared better (up 2% and almost 12%, respectively), and there are ongoing concerns about US Foods’ ability to drive better operating leverage on the cost side.
I was lukewarm-to-positive on US Foods before, and that’s basically where I’m at again today. I like the leverage to independent restaurants and cash-and-carry, and I do think there are opportunities to benefit from consolidation in the industry. Achieving lower distribution costs is a key to-do item, though, and while I can see the path to get there, execution needs to improve.
If US Foods can couple mid-single-digit revenue growth with meaningful margin improvement, bringing FCF margins up to around 3% by the end of 2030 versus a long-term trailing average of 1.5%, these shares should offer attractive upside from here, but this is definitely an execution-driven story.
Read the full article here:
No comments:
Post a Comment