Supply chain disruptions, a slowdown in shipping, and rising demand with the upcoming holiday season have led to rising food prices. Therefore, we think food distribution companies Sysco (SYY) and US Foods (USFD) should benefit. But which of these two stocks is a better buy now? Read more to find out.Sysco Corporation (NYSE:SYY) in Houston, Tex., markets and distributes various food and related products primarily to the foodservice or food-away-from-home industry internationally. It operates through U.S. Foodservice Operations, International Foodservice Operations, SYGMA, and Other segments. In comparison, US Foods Holding Corp . (NYSE:USFD) in Rosemont, Ill., through its subsidiary, US Foods, Inc., markets and distributes fresh, frozen, and dry food and non-food products to foodservice customers in the United States. It operates 70 distribution facilities and 78 cash-and-carry locations.
The cost of food in the United States increased 4.6% in September, according to the U.S. Bureau of Labor Statistics. The key reasons for rising food prices are overall supply chain disruptions, heavy demand for food commodities, and a slowdown in shipping. Federal Reserve chair Jerome Powell said that global supply chain issues could remain through 2022. Because these factors are expected to keep driving food prices higher, the food distribution industry should thrive. Therefore, we think both SYY and USFD should benefit.
SYY’s shares have gained 6.9% in price over the past nine months, while USFD has returned 4.5%. However, USFD’s 8.1% gains year-to-date are higher than SYY’s 5.1% returns. Furthermore, USFD is the clear winner with 42.3% gains versus SYY’s 20.4% in terms of their past year's performance.