ROSEMONT, Ill. - US Foods Holding Corp . (NYSE: NYSE:USFD), a prominent American foodservice distributor, has repurchased approximately $211 million of its common shares from a fund managed by Sachem Head Capital Management LP. The transaction, part of a broader $1 billion share repurchase program authorized on June 1, 2024, involved the buyback of shares at $52.28 each, including around $2 million in excise taxes.
The company's CEO, Dave Flitman, expressed that this move demonstrates confidence in their business strategy and their ability to meet long-term financial goals. Flitman indicated that US Foods is committed to improving the business for profitable growth and market share in selected customer segments. He also mentioned that due to the company's strong performance and the perceived undervaluation of its shares, they intend to accelerate share buybacks throughout the remainder of the year.
Scott Ferguson, Founder and Managing Partner of Sachem Head, also commented on the transaction, praising the strategic direction under Flitman's leadership and expressing confidence in the company's future profitability. Despite the sale, Sachem Head continues to hold a significant stake in US Foods and anticipates a promising future for the company.
US Foods is known for partnering with around 250,000 restaurants and foodservice operators across the United States, offering a wide range of food products and business solutions. The company operates more than 70 broadline locations and about 90 cash and carry stores, with a workforce of 30,000 associates.
Following the repurchase, US Foods still has approximately $691 million available in its authorized funds for further share buybacks. This information is based on a press release statement from the company.
In other recent news, US Foods Holding Corp has seen a series of positive adjustments by leading financial institutions. JPMorgan has raised the company's stock target from $58.00 to $60.00, citing a robust 3.2% in independent organic case volumes and adjusted EBITDA of $478 million in the second quarter. BMO Capital Markets, maintaining an Outperform rating and a $62.00 price target, highlighted US Foods' strategic plan for 2025 to 2027, which targets a 10% annual growth in EBITDA and a 20% annual increase in earnings per share (EPS).
Truist Securities, Wells Fargo, and BTIG have also raised their price targets following a strong first-quarter performance in 2024, which included a 6% increase in adjusted EBITDA to $356 million. Notably, US Foods has announced the acquisition of IWC Foodservice and plans for aggressive share repurchases throughout the year.
InvestingPro Insights
US Foods Holding Corp. (NYSE: USFD) has shown a commitment to returning value to shareholders through its recent share repurchase initiative. The company's current market capitalization stands at $13.16 billion, reflecting the scale of its operations and market presence. Despite a challenging market, US Foods is trading at a P/E ratio of 25.16, which is considered high relative to its near-term earnings growth. This indicates that investors have high expectations for the company's future performance.
An analysis of the company's financials reveals a revenue growth of 4.9% over the last twelve months as of Q2 2024, with a quarterly growth rate of 7.72% in Q2 2024. These figures demonstrate US Foods' ability to expand its top-line revenue. Nevertheless, one of the InvestingPro Tips points out that the company suffers from weak gross profit margins, which currently stand at 17.26%. This suggests that while revenue is growing, the cost of goods sold is impacting the company's profitability.
On a positive note, US Foods' liquid assets exceed its short-term obligations, providing the company with a cushion to manage its liabilities and invest in growth opportunities. Additionally, analysts predict the company will be profitable this year, a sentiment supported by a solid operating income of $1.058 billion and an EBITDA of $1.473 billion over the last twelve months as of Q2 2024.
For investors considering US Foods as a potential investment, it's worth noting that the company does not pay a dividend, which could be a factor for those seeking regular income streams. However, with the stock price nearing 96.14% of its 52-week high and a fair value estimate of $54.65 by InvestingPro, the company's shares appear to be valued appropriately by the market.
For more detailed analysis and additional InvestingPro Tips on US Foods, interested readers can visit https://www.investing.com/pro/USFD, where 7 more tips are available to provide further insights into the company's financial health and investment potential.
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