US Foods USFD Q3 earnings report on November 10 will give a preview of how food distributors are doing with Tyson Foods TSN and Hormel Foods HRL reporting later in the month. With an economic downturn looking more inevitable many food service companies could see a boost as consumers buckle down on excess spending and focus on necessities like food consumption.
US Foods markets and distributes fresh, frozen dry food, and non-food products to food service customers throughout the United States with some of its featured products and dishes being mini crab cakes, roasted jumbo chicken wings, and smoked beer briskets among others.
The company serves independent multi-unit restaurants, healthcare, and hospitality entities and began trading on the New York Stock Exchange in 2016. USFD has held up better than the broader market over the last year but underperformed its Food-Miscellaneous Industry which includes notable competitors United Natural Foods UNFI and Mondelez International MDLZ.
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With food retailers and distributors traditionally offering safety amid economic uncertainty, investors will be hoping that USFD can improve on its subpar industry performance with a strong earnings report and better than expected guidance.
The Zacks Consensus Estimate for USFD’s Q3 earnings is $0.59 per share, which would represent a 23% increase from Q3 2021. Sales for Q3 are expected to be up 9% at $8.64 billion. Earnings estimates for the period are slightly down from $0.60 at the beginning of the quarter.
Year over year, USFD earnings are expected to climb 39% to $2.16 per share. FY23 earnings are projected to rise another 25% to $2.72 per share. It is important to note that FY23 earnings estimates have significantly gone up over the last 60 days. Top line growth is expected as well, with sales projected to be up 14% this year and rise another 6% in FY23 to $35.66 billion.
Performance & Valuation
Year to date USFD is down -15% to narrowly outperform the S&P 500’s -21% but lag its peer group’s -6%. Since 2016 when the company began trading on the NYSE, USFD is up +19% to underperform the benchmark and its peer group’s +28%.
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We can see from the chart above that USFD stock suffered during the pandemic as demand for its food products faltered in the midst of logistics and supply issues. As we move further into a post-pandemic world, market conditions are becoming favorable for US Foods as consumer food consumption is expected to be higher despite rising inflation.
Trading around $30 per share, USFD has a forward P/E of 14X. This is below the industry average of 18.8X. Even better, USFD trades well below its 7-year high of 182X and is nicely beneath the median of 15.6X.
USFD currently sports a Zacks Rank #2 (Buy) with earnings estimate revisions trending much higher for FY23.
Food distributors have historically been good hedges against inflation and market uncertainty, with USFD also trading attractively relative to its past. And the Average Zacks Price Target suggests 35% upside from current levels.
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US Foods Holding Corp. (USFD): Free Stock Analysis Report
Hormel Foods Corporation (HRL): Free Stock Analysis Report
Tyson Foods, Inc. (TSN): Free Stock Analysis Report
United Natural Foods, Inc. (UNFI): Free Stock Analysis Report
Mondelez International, Inc. (MDLZ): Free Stock Analysis Report
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