On Friday, BMO Capital Markets maintained a constructive stance on the Food Service sector as it previewed the fourth quarter of 2024. The research firm indicated a stable to improving macroeconomic environment and anticipated continued market share gains for companies within the sector. BMO Capital shared insights on Sysco Corporation (NYSE:SYY), US Foods Holding Corp (NYSE:USFD) - a prominent player with $37.3 billion in revenue and $16 billion market cap, Performance Food Group Company (NYSE:PFGC), and The Chefs' Warehouse, Inc. (NASDAQ:CHEF), ahead of their earnings reports.
The industry data revealed a slight year-over-year increase in Retail Food Service industry sales, with a growth of 3.4% in the fourth quarter compared to 3.3% in the third quarter of 2024. Blackbox restaurant same-store foot traffic also showed improvement. BMO's food service inflation index indicated a rise of 2.7% in the fourth quarter, up from 2.0% in the previous quarter, hinting at a potential upside to the firm's inflation estimates.
For Sysco (NYSE:SYY), BMO Capital expressed a "patiently bullish" stance, despite a recent downturn in investor sentiment. The firm acknowledged potential risks such as union disputes and foreign exchange headwinds but slightly lowered its fiscal year 2025 earnings per share (EPS) estimate by a penny to $4.56, aligning with a conservative sales growth projection.
US Foods (NYSE:USFD) received praise for its consistent execution, with BMO rolling out quarterly estimates for 2025 while keeping annual estimates largely unchanged. The company has demonstrated strong performance with a 53% stock return over the past year, and according to InvestingPro, management has been actively buying back shares. The firm's outlook suggests that USFD's operational performance could support further valuation expansion, with analyst price targets ranging from $66.20 to $90.00.
Performance Food Group (NYSE:PFGC) remained a positive focus for BMO despite challenges in the convenience store industry. The firm noted improvements in convenience store volume and expressed confidence in PFGC's long-term food service prospects and potential for growth in categories such as smokeless tobacco.
Lastly, BMO Capital highlighted The Chefs' Warehouse (NASDAQ:CHEF) as its top small-cap pick for 2025, following meetings and preliminary guidance from the company.
In summary, BMO Capital Markets provided a positive overview of the Food Service sector, anticipating continued growth and share gains for the mentioned companies, despite some facing headwinds. The firm adjusted its estimates and price targets accordingly, reflecting a cautiously optimistic outlook for the upcoming earnings season. For investors tracking US Foods, InvestingPro subscribers can access over 10 additional ProTips and comprehensive financial metrics ahead of the company's next earnings report on February 18, 2025. The Pro Research Report available on InvestingPro provides detailed analysis and actionable insights for informed investment decisions.
In other recent news, US Foods Holding Corp. has reaffirmed its fiscal year 2024 financial outlook, projecting net sales to be between $37.7 billion and $38.0 billion, and adjusted EBITDA ranging from $1.72 billion to $1.74 billion. The company also anticipates adjusted diluted earnings per share to be between $3.05 to $3.15. Additionally, US Foods has expanded its Board of Directors with the appointment of David W. Bullock, bringing the total number of board members to nine.
Piper Sandler and BMO Capital Markets have both raised their price targets for US Foods to $75, maintaining an Overweight and Outperform rating, respectively. These adjustments followed US Foods' strong third quarter results, which showed a 6.8% increase in net sales to $9.7 billion, a 13.2% growth in adjusted EBITDA to $455 million, and a 21.4% rise in adjusted diluted EPS to $0.85.
The company also launched the Pronto delivery service in 40 markets and repurchased $580 million in shares during the quarter. These recent developments reflect the company's ongoing commitment to its shareholders and its successful execution of strategic plans.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.