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Jefferies Initiates Coverage Of Major Food Players

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Jefferies Initiates Coverage Of Major Food Players

Jefferies initiated coverage of two stocks in the food sector Friday, taking a bullish stance on an equity that analyst Christopher Mandeville said is positioned for sales and market share gains and a neutral stance on a stock the analyst said is fully valued. 

The Analyst

Mandeville initiated coverage on US Foods Holding Corp (NYSE: USFD) with a Buy and $45 price target and initiated coverage on Performance Food Group Co (NYSE: PFGC) with a Hold and $38 price target.

A 'Sound' Strategy For US Foods 

US Foods Holding Corp is at the forefront of technology within the foods space and is in a sound position to notch sales and market share gains by utilizing a tech-centric approach, Mandeville said in the upgrade note. (See the analyst's track record here.)

“Given the swath of cost pressures restaurants are seeing today and the fact that mobile/delivery is playing a greater role with how consumers want to interact, we believe USFD’s strategy is sound.”

The strategy will allow the company to focus on greater account penetration and pursue new customers, the analyst said. 

And while the economy has been healthy, the company’s planned chain account attrition will help to buffer downside risk and contribute to margins in the long run, Mandeville said. 

“Acknowledging how long this economic expansion has gone on, we believe it is wise of USFD to cull unfavorable chain contracts and be selective on new business.”

US Foods shares were up 0.19 percent at $37.26 at the close Friday. 

Performance Foods Group Appears Fully Valued

While Performance Food Group has outperformed major peers on growing cases and market share, the stock's valuation appears full, Mandeville said in a Friday note.

The company is positioned to continue driving market share gain with high-margin independents, the analyst said. 

While the company is trailing its peers in customer-facing tech and value added services, the gap represents a “significant” opportunity to drive sales and gross profit, Mandeville said. 

“PFGC’s nationally-scaled Vistar operation is a high-growth/margin business providing an already well-diversified customer mix but also long-term opportunity to enter new channels." 

The company’s valuation appears full and its lack of FCF conversion will limit its M&A and buyback potential, Mandeville said. 

“Despite all the positives and our view that PFGC’s F2020 EBITDA goal is attainable, such growth prospects are now generally reflected in what we see as peaking valuation," he said. 

Performance Food Group shares were up 0.28 percent at the close Friday. 

Related Link:

Benzinga's Top Upgrades, Downgrades For June 8, 2018

Credit Suisse's Winners And Losers In The Food Space 

Latest Ratings for PFGC

DateFirmActionFromTo
Feb 2021Credit SuisseMaintainsOutperform
Feb 2021Morgan StanleyMaintainsOverweight
Jan 2021Wells FargoMaintainsOverweight

View More Analyst Ratings for PFGC
View the Latest Analyst Ratings

 

Related Articles (PFGC + USFD)

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Posted-In: Christopher MandevilleAnalyst Color Price Target Initiation Analyst Ratings Best of Benzinga

Latest Ratings

StockFirmActionPT
LBCredit SuisseMaintains36.0
TRGPCredit SuisseMaintains40.0
SNOWCredit SuisseMaintains275.0
DARCredit SuisseMaintains95.0
CLRMKM PartnersDowngrades26.0
View the Latest Analytics Ratings
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