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Bull of the Day: US Foods (USFD)

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US Foods Holding Corp. (USFD - Free Report) provides its customers with a broad range of food offerings, as well as a comprehensive suite of e-commerce, technology and business solutions.

At the time of its 2016 IPO, the company was the second-largest U.S. food-service distributor and the 10th biggest private company in the country, with a 2014 market share of 9%.

US Foods is headquartered in Rosemont, IL, and provides food for over 250,000 customer locations, including local and national restaurant chains, hospitals, nursing homes, hotels, universities, and military organizations.

Solid Fourth Quarter Results

Earlier this month, the Zacks Rank #1 (Strong Buy) stock reported better-than-expected results for its fourth quarter.

Adjusted earnings of 44 cents per share just edged past the Zacks Consensus of 43 cents, while gross profit of $1.1 billion increased $1.1 billion.

Revenues jumped 5.6% to $6 billion, which also beat our consensus estimate.

Adjusted EBITDA increased 9.4% to $290 million.

Total case volume grew 1.9% (0.9% of this was organic growth) thanks to strong growth with US Foods’ targeted independent restaurant, healthcare, and hospitality customers. Independent restaurant case volume increased 7.1%.

Looking ahead at fiscal 2018, US Foods expects total case volume growth of 1-2%, revenue growth between 3-4%, adjusted EBITDA growth of 6-8%, and adjusted EPS in the range of $2.00-$2.10per share.

Estimates are Rising

For US Foods, its bottom line is headed down a steady upward track for the foreseeable future.

Earnings are expected to grow almost 78% for the current quarter. One analyst has revised their estimate upwards in the last 30 days, though one analyst has also cut their estimate for the same time period.

Fiscal 2018 figures are also looking pretty promising, with four estimates moving higher in the past month. The consensus estimate trend has jumped from $1.78 per share to $2.05 per share.

Earnings estimates for 2019 are on the rise as well, jumping from $2.01 per share to $2.34 per share in the last 30 days.

Can Shares Push Higher?

Shares of USFD have only gained 2.8% since the start of the year, and about 18% in the past one-year period.

USFD is currently trading with a forward P/E of 15.8, and a PEG ratio of 0.83 compared to the Food-Miscellaneous industry’s PEG of 2.

Looking at Food-Miscellaneous, the industry has underperformed compared to the broader S&P 500. For instance, the industry lost about 8.5% while the S&P gained 16.5% in the last one year.

However, US Foods is one of the standout stocks in an industry that has struggled recently. They have consistently delivered on key initiatives, like the “Great Food. Made Easy.” strategy, that provides them profitability and efficiency in a highly-fragmented market. Because of this, USFD looks to be an intriguing opportunity for investors.

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