I've been lukewarm on US Foods (NYSE:USFD) for a while, as I feel stuck between valuing the company on the basis of what it could (and arguably, should) achieve in terms of organic growth and margin leverage and the reality that management hasn't been delivering on that potential in a meaningful way. Now there's a proxy fight for control of the board, with investor Sachem Head looking to take over and presumably put the company on the "right path".
These shares are up about 7% since my last update, beating the S&P 500, but largely tracking with food distribution peers Sysco (SYY) and Performance Food Group (PFGC). These shares do still look undervalued, but I see risks around the proxy fight - if management wins, I'm concerned that investors may see more of the same underwhelming results, but I haven't seen a compelling plan from the other side either, and I worry about the risks of a hack-and-slash approach to cost-cutting.
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