US Foods’ CEO Search Concludes; Our Standard Capital Allocation Unchanged; Shares Attractive

After ousting prior CEO Pietro Satriano on May 10 (prompted by activist investor Sachem Head), no-moat US Foods announced David Flitman would assume the helm effective Jan. 5, 2023. Until Flitman joins US Foods’ ranks, interim CEO Andrew Iacobucci will continue to hold the reins, at which time Iacobucci will join the board, increasing the board size to a total of 14 directors. This news does little to sway our long-term prognosis on US Foods (mid-single-digit underlying sales growth and nearly 4% operating margins long term) and our Standard capital allocation rating, based on the firm’s solid investment strategy (it has paid a fair price for acquired assets), sound balance sheet, and appropriate shareholder distributions. As such, we don’t plan to materially alter our $44.50 fair value estimate for US Foods but suggest investors consider stocking up on shares, which trade at around a 30% discount to our valuation.