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US Foods Holding Corp USFD

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Morningstar’s Analysis

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Despite Margin Pressure, Higher Wage Rates Should Help No-Moat US Foods Staff for Future Growth

Analyst Note

| Rebecca Scheuneman, CFA |

Despite the mid-single-digit drop in the shares of no-moat US Foods, we are pleased with its third-quarter results, as our profit expectations were not as rosy as FactSet consensus. US Foods reported 35% sales growth (compared with our 28% mark and 30% for consensus) driven by 18.5% case growth as the market recovers from the pandemic, 11.5% food inflation, and a 4.9% mix benefit. Total sales were at 94% of the prepandemic level excluding acquisitions, including 101% for restaurants, 92% for healthcare, and 72% for hospitality. Management said the delta variant has not weakened demand, and it even cited an acceleration in volumes in October.

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Company Profile

Business Description

US Foods is the second- largest U.S. food-service distributor behind Sysco, holding 10% market share of the highly fragmented food-service distribution industry. US Foods distributes more than 400,000 food and nonfood products to the healthcare and hospitality industries (each about 16.5% of sales), independent restaurants (33%), national restaurant chains (22%), education and government facilities (8%), and grocers (4%). In addition to its delivery business, the firm has 80 cash and carry stores under the Chef'Store banner. After Sysco's attempt to purchase US Foods failed to gain federal approval in 2015, US Foods entered the public market via an initial public offering.

9399 West Higgins Road, Suite 100
Rosemont, IL, 60018
T +1 847 720-8000
Sector Consumer Defensive
Industry Food Distribution
Most Recent Earnings Sep 30, 2021
Fiscal Year End Dec 31, 2020
Stock Type Slow Growth
Employees 26,000