Major foodservice distributor US Foods Holding (USFD 1.90%) made a presentation yesterday at the 2021 ICR Conference, an annual business symposium run by ICR Capital LLC, in which US Foods presented its evidence for an upcoming food sector recovery. Some of the factors it cited apply only to the company, while others paint a favorable picture for the foodservice supply and food sector in general.
US Foods says pent-up demand for eating out is rising among American diners, who are likely to flock to reopened restaurants once the COVID-19 pandemic is brought under control by vaccines. The fact that well-managed restaurants have minimized their coronavirus losses even as states impose new restrictions provides a hint the company may be right.
US Foods says its large scale and established presence are advantages in making the most of restaurant reopening profit opportunities, and pointed out it has historically deleveraged using its cash flow, a situation it expects to resume after the pandemic. It also notes its digital and e-commerce expertise as a major strength, with 70% of its revenue generated online and approximately 67% of its foodservice customers rating its e-commerce ordering highly.
Wells Fargo's analysts appear to agree with US Foods. In a research note issued today, it said the food company has "lowered expectations for Q4 and it seems Q1 could be similarly challenging," but that "[beyond] the near-term update, there was much to like." Expecting both a general rebound for the food sector as COVID-19 restrictions ebb in response to vaccine rollouts, and strong results for the company once this happens, Wells Fargo gives US Foods a $47 price target -- more than a 30% upside compared to this morning's share price -- and an overweight rating.