- Morgan Stanley analyst John Glass reiterated the Overweight rating on the shares of Performance Food Group Co PFGC and raised the price target from $65 to $67.
- The analyst said the company had another strong quarter, with sales and EBITDA above the latest guidance, as gross margin came in better.
- Glass noted that inflation continued to benefit sales and drive operating leverage, but it didn’t cause a gross margin percentage miss as many expected.
- He added that inflation eased in Foodservice but picked up in the other two segments, where price increases for packaged foods and tobacco products remain pervasive.
- Though the analyst still expects inflation to ease in all segments going forward, the pace may be more gradual.
- Key elements of Glass’ thesis on Performance Foods were visible in Q1, including share gains and ongoing strong performance with independent restaurants, higher private label brand penetration, opex control, Vistar recovery in higher margin segments with sales above expectations, and strong performance in the expanded Convenience segment in higher margin non-tobacco products.
- He flagged that Q2 sales are expected to be $13.6 billion-$13.9 billion, slightly up from $13.5 billion-$13.8 billion prior, and EBITDA $260 million – $280 million versus $245 million-$265 million prior.
- Price Action: PFGC shares are trading higher by 1.03% at $56.84 on the last check Friday.
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