US Foods Holding Corp. is scheduled to report third-quarter earnings on Thursday before the market opens. Analysts expect the foodservice distributor to face pressure from weaker restaurant traffic and ongoing cost inflation.
The consensus forecast is earnings of $1.26 per share on revenue of $10.61 billion, up 17.8% and 4.1% year over year, respectively. The expected earnings figure is below the $1.44 per share reported in the second quarter, even as revenue is projected to edge higher. That contrast puts the company’s ability to manage margins in focus.
Analysts have a Buy rating on the stock and an average price target of $116, implying 14.4% upside from its cited price of $101.36. However, earnings estimates have slipped 0.45% over the past 60 days, while revenue expectations have remained broadly unchanged. Morgan Stanley kept its Hold rating in mid-October and raised its target to $111 from $107. JPMorgan lowered its target to $98 from $108 in late September.
Investors are expected to assess whether food and labor costs are adding to margin pressure, and how effectively US Foods can pass expenses on to customers without weakening relationships. The company’s sales volumes and customer mix will also be in focus as consumers reduce restaurant visits. Analysts are looking for signs of demand among independent restaurants and in segments such as healthcare and hospitality.
Efficiency efforts could help offset those pressures. US Foods has invested in technology and operational improvements intended to lower costs and improve service. Updates on adoption, savings or customer retention connected with those initiatives may offer insight into the company’s ability to protect margins.
In the second quarter, US Foods reported earnings of $1.44 per share, exceeding the $1.37 consensus by 5.1%. Revenue was $10.5 billion, 0.4% above expectations. The upcoming results will show whether that performance can continue amid cautious consumer demand, elevated costs and competition. The source report puts the stock’s forward price-to-earnings ratio at 20.98 and notes that guidance could influence how investors assess its growth outlook.
Sources: Investing.com News.