Us Foods (USFD) Q2 EPS Jumps 28%

Us Foods (USFD -0.37%), one of the largest foodservice distributors in the United States, released its Q2 FY2025 results on August 7, 2025. The company delivered adjusted diluted earnings per share (EPS) of $1.19, beating analyst expectations of $1.14 by 4.4% (non-GAAP). Revenue (GAAP) hit $10.1 billion, missing the consensus estimate of $10,177.57 million, but marked a 3.8% increase from the prior year period. Margin improvements, increased cost efficiency, and strong performance in targeted customer segments helped offset a slowdown in chain restaurant volumes. Overall, the quarter showed further progress in profitability, share buyback activity, and operational execution, though demand within certain segments continues to be a challenge.

Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.

Understanding Us Foods: Business Overview and Priorities

Us Foods is a broadline foodservice distributor that supplies restaurants, hospitals, hotels, and other institutional foodservice providers across the United States. The company operates more than 70 distribution centers and runs a fleet of over 6,500 trucks, delivering to roughly 250,000 customer locations nationwide. It manages a diversified portfolio of products, including its own exclusive brands and a growing assortment of sustainable and health-focused options.

In recent years, Us Foods has focused on a few key areas to drive growth and profitability. These include expanding its distribution network, investing in technology and digital solutions like its MOXē ordering platform, adapting to evolving consumer preferences with new product innovation, pursuing strategic acquisitions, and positioning itself competitively within an industry marked by consolidation and diverse customer needs. Success for the company hinges on margin expansion, capturing share in high-growth segments such as independent restaurants and healthcare, and further improving its operational efficiency.

Quarter in Detail: Results, Trends, and Strategic Moves

During Q2 FY2025, US Foods saw adjusted diluted EPS (non-GAAP) grow by 28.0% over the prior year, outpacing analyst estimates by a healthy margin (non-GAAP). Revenue (GAAP) increased by 3.8%, falling just short of expectations (GAAP) but still reflecting growth in key target areas. Notably, volume in independent restaurants rose 2.7%, healthcare segment volume climbed 4.9%, and hospitality case volume increased 2.4%. These segments, which the company identifies as higher-margin and more resilient, continued to build momentum, offsetting pressure from weak demand in chain restaurants, where case volume fell 4.0%.

Gross profit (GAAP) improved by 4.2% to $1.8 billion, aligning with the company's strategic focus on operational discipline and mix shift toward more profitable customer segments. Adjusted EBITDA, a non-GAAP measure of core profitability before interest, taxes, depreciation, and amortization, gained 12.1% over the previous year. Margin improvement came from several factors, including modest food cost inflation of 2.5%, operational productivity gains, and efficiency programs. Operating expenses rose in line with sales, reflecting continued investment in distribution capacity and technology.

Capital allocation and cash flow performance also stood out this quarter. Operating cash flow (GAAP) for the first six months of FY2025 reached $725 million The company invested $161 million in the first half of FY2025, mostly for technology upgrades, property improvements, and warehouse automation. Net leverage declined to 2.6x from 2.8x at year-end, as measured by Net Debt to Adjusted EBITDA at the end of Q2 FY2025 compared to FY2024, and Net debt (non-GAAP) decreased by $99 million from $4,869 million as of December 28, 2024 to $4,770 million as of Q2 FY2025. Importantly, US Foods returned $250 million to shareholders through share repurchases and authorized a further $1 billion buyback program.

The company continued its push in digital transformation, with more than 80% of sales now managed online. AI-driven sales productivity tools were rolled out to the sales force. In product development, the flagship Scoop™ exclusive brand line surpassed $1 billion in annual sales in FY2024. Sustainably sourced products, featured in the Serve Good® portfolio, and other on-trend offerings contributed to differentiation in a competitive environment. Management signaled these acquisition contributions would moderate in the coming months.

The company does not currently pay a dividend.

Looking Ahead: Guidance and Investor Watchpoints

Management updated its full-year guidance during the Q2 FY2025 earnings release, now expecting adjusted EBITDA growth in the range of 9.5%–12% (up from 8%–12% previously), and adjusted diluted EPS to grow between 19.5% and 23% (up from 17%–23%). These are non-GAAP measures. Net sales growth guidance for FY2025 remained unchanged at 4%–6%. Management noted these targets rely on successful execution of margin and cost initiatives, continued focus on high-growth segments, and a stable macroeconomic backdrop.

For investors tracking Us Foods, key areas to monitor in the next quarters include the pace of independent restaurant and healthcare volume growth, gross margin trends, competitive dynamics within food distribution, and further progress on digital transformation. Despite a top-line miss on GAAP revenue, operational efficiency gains and the expansion of higher-margin business lines positioned the company for continued profitability improvements. While macroeconomic uncertainty remains a factor, management's reaffirmed confidence in its long-term margin and earnings targets will be important as the year progresses.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.