US Foods Holding Corp. (USFD) Bundle
Understanding US Foods Holding Corp. (USFD) Revenue Streams
Understanding US Foods Holding Corp.’s Revenue Streams
In 2024, net sales for US Foods Holding Corp. reached $28,386 million, marking an increase of $1,725 million or 6.5% compared to $26,661 million in 2023. This growth was primarily driven by organic case volume growth, the impact of acquisitions, and food cost inflation of 2.5%.
Breakdown of Primary Revenue Sources
The company's revenue streams can be delineated into various segments, including:
- Independent Restaurant Case Volume: Increased by 4.8% in 2024.
- Healthcare Volume: Increased by 6.1% in 2024.
- Hospitality Volume: Increased by 2.0% in 2024.
- Chain Volume: Increased by 3.5% in 2024.
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rate for 2024 shows a positive trend:
- For the 39 weeks ended September 28, 2024: 6.5%
- For the 13 weeks ended September 28, 2024: 6.8%
Contribution of Different Business Segments to Overall Revenue
In terms of revenue contribution, organic broadline sales of private brands represented approximately 34% of net sales in both 2024 and 2023.
Analysis of Significant Changes in Revenue Streams
Significant changes in revenue streams for 2024 include:
- Total case volume increased by 4.4%.
- Independent restaurant case volume increased by 4.8%.
| Metric | 2024 (39 weeks) | 2023 (39 weeks) | Change |
|---|---|---|---|
| Net Sales | $28,386 million | $26,661 million | +6.5% |
| Independent Restaurant Case Volume Growth | 4.8% | N/A | N/A |
| Healthcare Volume Growth | 6.1% | N/A | N/A |
| Hospitality Volume Growth | 2.0% | N/A | N/A |
| Chain Volume Growth | 3.5% | N/A | N/A |
A Deep Dive into US Foods Holding Corp. (USFD) Profitability
A Deep Dive into US Foods Holding Corp's Profitability
Gross Profit: For the 39 weeks ended September 28, 2024, gross profit increased by $310 million, or 6.8%, to $4,868 million. The gross profit margin as a percentage of net sales was 17.1% in both 2024 and 2023.
Operating Profit: Operating income for the 39 weeks ended September 28, 2024, was $797 million, an increase of $58 million compared to $739 million in 2023. Operating expenses increased by $252 million, or 6.6%, to $4,071 million.
Net Profit: Net income rose by $69 million to $428 million for the 39 weeks ended September 28, 2024, compared to $359 million in 2023. The net income margin was 1.5% in 2024, up from 1.3% in 2023.
| Metric | 2024 (39 weeks) | 2023 (39 weeks) |
|---|---|---|
| Net Sales | $28,386 million | $26,661 million |
| Gross Profit | $4,868 million | $4,558 million |
| Gross Profit Margin | 17.1% | 17.1% |
| Operating Income | $797 million | $739 million |
| Net Income | $428 million | $359 million |
| Net Income Margin | 1.5% | 1.3% |
Trends in Profitability: The company experienced consistent growth in net sales, which increased by $1,725 million, or 6.5%, from 2023 to 2024. The growth was driven mainly by organic case volume increases and food cost inflation.
Comparison of Profitability Ratios with Industry Averages: The gross profit margin of 17.1% is comparable to the industry average of approximately 16-18%, indicating robust pricing power and cost management strategies.
Analysis of Operational Efficiency: Operating expenses as a percentage of net sales were 14.3% for both 2024 and 2023, indicating stable cost management despite rising labor and distribution costs. Adjusted EBITDA for the 39 weeks ended September 28, 2024, was $1,300 million, reflecting an 11.0% increase from the previous year.
| Metric | 2024 (39 weeks) | 2023 (39 weeks) |
|---|---|---|
| Adjusted EBITDA | $1,300 million | $1,171 million |
| Adjusted EBITDA Margin | 4.6% | 4.4% |
| Free Cash Flow | $658 million | $776 million |
Overall, the financial metrics indicate a positive trend in profitability and operational efficiency, positioning the company favorably within its industry.
Debt vs. Equity: How US Foods Holding Corp. (USFD) Finances Its Growth
Debt vs. Equity: How US Foods Holding Corp. Finances Its Growth
As of September 28, 2024, the total outstanding debt of the company was $4,789 million, net of $26 million of unamortized deferred financing costs. This debt comprises various facilities and maturities as detailed below:
| Debt Description | Maturity | Interest Rate | Carrying Value (in millions) |
|---|---|---|---|
| ABL Facility | December 7, 2027 | 6.30% | $75 |
| 2019 Incremental Term Loan Facility | N/A | N/A | $1,101 |
| 2021 Incremental Term Loan Facility | N/A | N/A | $719 |
| Senior Notes due 2028 | September 15, 2028 | 6.88% | $496 |
| Senior Notes due 2029 | February 15, 2029 | 4.75% | $895 |
| Senior Notes due 2030 | June 1, 2030 | 4.63% | $497 |
| Senior Notes due 2032 | January 15, 2032 | 7.25% | $496 |
The debt-to-equity ratio as of September 28, 2024, was calculated at 1.09, comparing favorably to the industry average of approximately 1.50. This indicates a balanced approach to leveraging debt versus equity financing.
During the fiscal year, the company undertook several refinancing activities and issued new debt instruments, contributing to its overall liquidity and capital structure. The interest expense for the 39 weeks ended September 28, 2024, was $235 million, a decrease from $244 million in the prior year, mainly due to reduced outstanding debt.
As of September 28, 2024, the company had approximately $1.7 billion in available liquidity, which includes cash and remaining borrowing capacity. The company balances its growth financing between debt and equity, with recent capital increases primarily through common stock repurchases, amounting to $628 million in the current fiscal year.
The following table summarizes the company's recent debt issuances and equity funding activities:
| Activity | Amount (in millions) | Type | Date |
|---|---|---|---|
| Debt Issuance | $2,454 | Borrowings | 2024 |
| Debt Repurchase | $1,000 | Senior Notes | 2023 |
| Common Stock Repurchase | $628 | Equity | 2024 |
The company maintains a prudent capital structure, balancing between debt financing and equity funding to support its operational needs and growth objectives.
Assessing US Foods Holding Corp. (USFD) Liquidity
Assessing US Foods Holding Corp.'s Liquidity
Current and Quick Ratios
The current ratio for US Foods Holding Corp. as of September 28, 2024, is 1.18, indicating that the company has $1.18 in current assets for every $1.00 in current liabilities. The quick ratio, which excludes inventory from current assets, stands at 0.91, suggesting that the company may face challenges in covering its short-term liabilities without relying on inventory sales.
Analysis of Working Capital Trends
As of September 28, 2024, US Foods Holding Corp. reported total current assets of approximately $2.4 billion and total current liabilities of approximately $2.03 billion, resulting in working capital of $370 million. This represents a slight increase from $320 million in the prior year, reflecting improved operational efficiencies and inventory management.
Cash Flow Statements Overview
For the 39 weeks ended September 28, 2024, the company generated cash flows from operating activities amounting to $891 million, a decrease from $935 million in the prior year. Cash flows used in investing activities totaled $447 million, while financing activities used $632 million. This resulted in a net decrease in cash and cash equivalents of $188 million, with an ending cash balance of $81 million.
| Cash Flow Activity | 39 Weeks Ended September 28, 2024 (in millions) | 39 Weeks Ended September 30, 2023 (in millions) |
|---|---|---|
| Net cash provided by operating activities | $891 | $935 |
| Net cash used in investing activities | ($447) | ($301) |
| Net cash used in financing activities | ($632) | ($499) |
| Net increase in cash | ($188) | $135 |
| Ending cash balance | $81 | $346 |
Potential Liquidity Concerns or Strengths
US Foods Holding Corp. maintains a robust liquidity position with approximately $1.7 billion in cash and available liquidity as of September 28, 2024. However, the decrease in cash flow from operating activities and the increase in cash used for financing activities, particularly due to share repurchase programs, may raise some liquidity concerns. The company has a debt load of $4.79 billion, which includes various term loans and senior notes, highlighting the need for careful cash management to meet upcoming obligations.
Is US Foods Holding Corp. (USFD) Overvalued or Undervalued?
Valuation Analysis
In assessing whether the company is overvalued or undervalued, we will look at key financial metrics including the price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA) ratios, alongside stock price trends, dividend yield, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The P/E ratio is calculated as the current stock price divided by its earnings per share (EPS). As of September 28, 2024, the EPS was $1.75. If the stock is trading at $30, the P/E ratio would be:
- P/E = Stock Price / EPS = $30 / $1.75 = 17.14
Price-to-Book (P/B) Ratio
The P/B ratio is calculated by dividing the stock price by its book value per share. The book value per share as of September 28, 2024, was $5.00. Thus, if the stock is at $30, the P/B ratio would be:
- P/B = Stock Price / Book Value = $30 / $5 = 6.00
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio provides a measure of a company's overall value compared to its earnings. The enterprise value is approximately $4.8 billion, and the EBITDA for the latest period was $1.3 billion. Therefore:
- EV/EBITDA = Enterprise Value / EBITDA = $4,800 million / $1,300 million = 3.69
Stock Price Trends
Over the past 12 months, the stock price has experienced fluctuations. It started at approximately $25 and reached a high of $32 before settling at $30.
Dividend Yield and Payout Ratios
The company declared dividends for the year, amounting to $0.10 per share. Given the current stock price of $30, the dividend yield is:
- Dividend Yield = Annual Dividend / Stock Price = $0.10 / $30 = 0.33%
The payout ratio based on the net income of $428 million and total dividends paid would be:
- Payout Ratio = Total Dividends / Net Income = ($0.10 250 million shares) / $428 million = 0.10% (approximately)
Analyst Consensus on Stock Valuation
Analysts have rated the stock with a consensus recommendation of Hold. The average target price among analysts is approximately $28, indicating a slight decline from the current price.
| Metric | Value |
|---|---|
| P/E Ratio | 17.14 |
| P/B Ratio | 6.00 |
| EV/EBITDA Ratio | 3.69 |
| Current Stock Price | $30.00 |
| 12-Month Stock Price Range | $25 - $32 |
| Dividend Yield | 0.33% |
| Payout Ratio | 0.10% |
| Analyst Consensus | Hold |
Key Risks Facing US Foods Holding Corp. (USFD)
Key Risks Facing US Foods Holding Corp.
Overview of Internal and External Risks
The company faces several internal and external risks that could impact its financial health, including:
- Intense industry competition from both national and regional distributors.
- Fluctuations in market conditions affecting food prices and supply chains.
- Regulatory changes that could impose additional costs or operational constraints.
Operational, Financial, and Strategic Risks
Recent earnings reports highlight several operational and financial risks:
- Increased operating expenses, which rose by $252 million or 6.6% to $4,071 million for the 39 weeks ended September 28, 2024.
- Significant interest expense of $235 million in 2024, despite a decrease from the previous year, indicating ongoing debt obligations.
- Gross profit affected by a LIFO expense of $68 million, which can impact profitability during inflationary periods.
Mitigation Strategies
The company has implemented several strategies to mitigate these risks:
- Enhancing distribution efficiency to manage rising costs associated with labor and logistics.
- Investing in technology upgrades to improve operational productivity and reduce overhead costs.
- Utilizing forward purchase commitments for fuel and electricity to stabilize costs.
| Risk Type | Description | Financial Impact (2024) |
|---|---|---|
| Operational | Increased operating expenses due to labor and logistics costs. | $4,071 million |
| Financial | Interest expense on outstanding debt. | $235 million |
| Strategic | LIFO expense impacting gross profit during inflationary periods. | $68 million |
| Market | Food cost inflation affecting pricing strategies. | Inflation rate of 2.5%-3.2% |
As of September 28, 2024, the company reported net income of $428 million, reflecting a year-over-year increase of $69 million. This demonstrates resilience despite the outlined risks.
Future Growth Prospects for US Foods Holding Corp. (USFD)
Future Growth Prospects for US Foods Holding Corp.
Analysis of Key Growth Drivers
The company has identified several key growth drivers, including:
- Product Innovations: Continued focus on enhancing product offerings, particularly in private label categories, which represented approximately 34% of net sales in 2024.
- Market Expansions: Strategic acquisitions such as the purchase of IWC Food Service for $220 million, aimed at expanding reach into Tennessee and the Southeast United States.
- Acquisitions: The impact of acquisitions contributed significantly to revenue growth, with total net sales increasing by $1,725 million or 6.5% in 2024.
Future Revenue Growth Projections and Earnings Estimates
Revenue growth projections indicate a positive trajectory, with net sales expected to continue increasing driven by organic case volume growth and pricing optimization:
- 2024 Net Sales: $28,386 million
- 2024 Adjusted EBITDA: $1,300 million, an increase of 11.0% from the previous year.
- Net Income for 2024: $428 million, compared to $359 million in 2023.
Strategic Initiatives or Partnerships That May Drive Future Growth
Strategic initiatives include:
- Partnerships: Expanding collaborations with independent restaurants, healthcare providers, and hospitality sectors, which saw independent restaurant case volume grow by 4.8% in 2024.
- Innovative Distribution Strategies: Enhancing logistics and distribution capabilities to improve service efficiency and reduce costs.
Competitive Advantages That Position the Company for Growth
Competitive advantages include:
- Robust Supply Chain: A well-established supply chain that enables the company to respond swiftly to market demands.
- Strong Brand Portfolio: A diverse range of products that caters to various market segments, including private brands that offer higher margins.
- Experienced Leadership Team: A knowledgeable management team with experience in navigating market challenges and capitalizing on growth opportunities.
| Financial Metric | 2023 | 2024 | Change (%) |
|---|---|---|---|
| Net Sales | $26,661 million | $28,386 million | 6.5% |
| Operating Income | $739 million | $797 million | 7.8% |
| Net Income | $359 million | $428 million | 19.2% |
| Adjusted EBITDA | $1,171 million | $1,300 million | 11.0% |
Overall, the company is poised for continued growth through strategic initiatives, market expansions, and leveraging competitive advantages in the food distribution sector.
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Updated on 16 Nov 2024
Resources:
- US Foods Holding Corp. (USFD) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of US Foods Holding Corp. (USFD)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View US Foods Holding Corp. (USFD)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.