Earnings preview: Mixed sentiment ahead of US Foods Holding’s Q3 report

Foodservice distributor US Foods Holding (USFD) is all set to announce results for the most recent quarter, after reporting downbeat numbers for the second quarter that dented its market value. When the company unveils the third-quarter results Tuesday before the opening bell, the market will be looking for earnings of $0.51 per share, up 30.8% from last year. Revenues are expected to increase by2.5% to $6.36 billion.

Of late, the company that distributes fresh and frozen food products has been facing a slump in growth, with few avenues available for expansion. While the recent acquisitions helped it regain the lost momentum to some extent, investors are skeptical about the long-term benefits. Experts believe it would take a few of years before the acquired facilities, mainly distribution centers, start contributing to earnings.

While recent acquisitions helped it regain the lost momentum to some extent, investors are skeptical about the long-term benefits

So, the future lies in enhancing order volumes, which at present is facing a downtrend despite the efforts to achieve margin growth by raising prices. Considering the uncertainties over long-term growth, US Foods Holding might not be a promising investment option in the present scenario.

Meanwhile, a section of analysts beg to differ, saying that the relatively low-priced stock has the potential to gain even if the company’s operational performance remains mediocre.

RELATED: US Foods Holding Corp. Q2 2018 Earnings Call Transcript

In the second quarter, earnings of the Illinois-based company more than doubled to $161 million or $0.57 per share from the year-ago quarter. Revenues were flat at $6.2 billion. The results fell short of expectations, triggering a stock selloff.

Earlier this week, the management announced plans to build a large distribution center in McClellan, California, spending $71.6 million. The initiative, being taken forward under its ‘Great Food Made Easy’ program is expected to help in serving independent restaurant customers in the region more effectively.

Shares of US Foods Holding reached a peak in late July, before falling to a five-month low. After losing about 10% in the year-to-date period, the stock traded slightly lower on Friday.

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