Food distribution company US Foods Holding Corp. (USFD) sells and distributes fresh, frozen, and dry food and non-food products to restaurants, national restaurant chains, hospitals, hotels, government and military organizations, colleges and universities, and retail locations. 

The company recently announced a change in management by appointing Dave Flitman as the new chief executive officer and a board member. Last month, USFD announced the national rollout of MOXē (Making Operator Xperiences Easy), an all-in-one e-commerce application.

The company expects adjusted EBITDA of $1.28-$1.30 billion and an adjusted EPS of $2.10-$2.20 for fiscal 2022. In addition, USFD’s Board of Directors approved a share repurchase program to repurchase up to $500 million of its outstanding common stock.

The stock has gained 2.1% year-to-date. It has gained 13.1% over the past three months and 17.6% over the past month to close its last trading session at $35.56.

Here are the factors that could influence USFD’s performance in the upcoming months:

Solid Financial Growth

For the fiscal third quarter ended October 1, USFD’s net sales increased 13% year-over-year to $8.92 billion. Its adjusted gross profit rose 15.2% from the prior-year quarter to $1.47 billion. Its adjusted net income and adjusted EPS improved 26.9% and 25% from the prior-year period to $151 million and $0.60, respectively.

Discounted Valuation

In terms of forward non-GAAP PEG, USFD is trading at 0.23x, 91.7% lower than the industry average of 2.72x. The stock’s forward EV/Sales multiple of 0.39 is 76.7% lower than the industry average of 1.68.

In terms of forward Price/Sales, it is trading at 0.23x, 80.4% lower than the industry average of 1.19x. Its forward Price/Book multiple of 2.04 is 31.7% lower than the industry average of 2.98.

Favorable Analyst Estimates

The consensus EPS estimates of $0.53 and $0.43 for the consecutive quarters ending December 2022 and March 2023 indicate 39.5% and 19.4% year-over-year increases. Likewise, the consensus revenue estimate for the same periods of $8.52 billion and $8.45 billion reflect improvements of 11.6% and 8.3% from their respective prior-year periods.

Analysts expect USFD’s revenue and EPS for the current year (fiscal 2022) to increase 15.7% and 39.4% year-over-year to $34.12 billion and $2.16, respectively. Its EPS is estimated to grow 27.4% per annum over the next five years.

POWR Ratings Reflect Promising Prospects

USFD’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. The stock has a Growth grade of B, in sync with its solid financial growth in the last quarter. It also has a B grade for Value, consistent with its cheap valuation.

In the 82-stock Food Makers industry, it is ranked #14. The industry is rated B.

Click here to see the additional POWR Ratings for USFD (Momentum, Stability, Sentiment, and Quality).

View all the top stocks in the Food Makers industry here.

Bottom Line

USFD’s solid bottom-line growth in the last quarter is promising. Moreover, analysts expect further upsides in its revenue and EPS in the upcoming quarters. With the stock trading higher than its 50-day moving average of $29.55 and 200-day moving average of $32.74, this food maker stock might be a solid buy this holiday season.

How Does US Foods Holding Corp. (USFD) Stack Up Against its Peers?

While USFD has an overall POWR Rating of B, one might consider looking at its industry peers, Industrias Bachoco, S.A.B. de C.V. (IBA) and Grupo Bimbo, S.A.B. de C.V. (GRBMF), which have an overall A (Strong Buy) rating.

USFD shares were trading at $35.50 per share on Tuesday morning, down $0.06 (-0.17%). Year-to-date, USFD has gained 1.92%, versus a -15.73% rise in the benchmark S&P 500 index during the same period.

About the Author: Anushka Dutta

Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research. More...

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