Analyst: US food could have a 30% rise

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Large foodservice distributor US Foods Holding (NYSE: USFD) made a presentation yesterday at ICR 2021, an annual business symposium hosted by ICR Capital LLC, where US Foods presented its evidence of an upcoming food industry recovery. Some of the factors cited apply only to the business, while others paint a favorable picture for catering supply and the food industry in general.

US Foods says pent-up restaurant demand is increasing among American diners, who will likely flock to reopened restaurants once the COVID-19 pandemic is brought under control with vaccines. The fact that well-run restaurants minimized losses from coronavirus even if states impose new restrictions, it gives a clue that the company may be right.

Image source: Getty Images.

US Foods says its large-scale and established presence is an advantage in making the most of the profit opportunities of reopening restaurants, and noted that it has historically deleveraged using its cash flow, a situation that ‘he expects to resume after the pandemic. It also notes its digital and e-commerce expertise as a major asset, with 70% of its turnover generated online and around 67% of its catering customers highly value its e-commerce orders.

Wells Fargo analysts seem to agree with US Foods. In a research note released today, he said the food company has “lowered expectations for the fourth quarter and it looks like the first quarter could be just as difficult,” but that “[beyond] the short-term update, there was a lot to like. Expecting both a general rebound for the food industry as COVID-19 restrictions decrease in response to vaccine deployments, and strong results for the company once that happens, Wells Fargo gives US Foods has a price target of $ 47 – over 30% higher from this morning’s share price – and an overweight rating.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Questioning an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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