US Foods Holding Corp USFD last week hosted its analyst day presentation in which management's encouraging outlook implies there's "no reason to stay on the sidelines," according to BMO.
The Analyst
BMO Capital Markets' Kelly Bania upgraded US Foods from Market Perform to Outperform with a price target lifted from $37 to $40.
The Thesis
Heading into the analyst day presentation, Bania held a positive stance on the independent restaurant segment and the company's positioning to gain market share in the group. But management made the case for being bullish on the stock based on a reiteration of a three-year 8 to 10 percent EBITDA growth outlook, a 6 to 8 percent EBITDA growth in 2018, and 3 to 4 percent adjusted gross profit dollar growth.
Management's commentary implies a 2020 EPS outlook of $2.70 to $3.00\, which is ahead of the Street's estimate of $2.66 and Bania's own estimate of $2.48 per share. Management's guidance also implies the stock is among the cheapest within the foodservice distributor growth based on the stock's current 14.7 times multiple on 2019E EPS which is a premium to its historical average of 17 times
US Foods is well positioned to take advantage of multiple trends and shifts in the industry, including a push towars local and sustainable food products, growth of meal kit deliveries, and virtual restaurants and grocerants that are still in the early stages.
Price Action
Shares of US Foods Holding were trading higher by 1 percent Monday.
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