2023-06-20 07:59:40 ET
Morgan Stanley reset ratings in the food service sector on Tuesday with US Foods ( NYSE: USFD ) being upgraded to Overweight from Equal-weight and Performance Food Group ( PFGC ) landing a downgrade to Equal-weight. Sysco ( SYY ) was kept rated at Equal-weight.
Analyst Brian Harbour and team noted some fundamental factors continue to work in USFD's favor and drive the narrative around the stock. USFD earned the higher rating with new management focused on service, operations and supply chain. The improved financial performance and consistency in results is expected to eliminate USFD's typical valuation discount. A cleaned-up balance sheet and USFD's relative diversification across the restaurant sector are also seen as positive factors. Morgan Stanley's price target of $54 on USFD is based on 10.5X the 2024 EBITDA estimate.
Morgan Stanley turned cautious on Performance Food Group ( PFGC ) due to the company having more exposure to casual dining and pizza, which are anticipated to remain more challenged categories for now. Sysco ( SYY ) was kept at Equal-weight in part due to its recent underperformance vs. expectations and guidance, as well as some uncertainty around the FY24 guidance to come in August in the context of some management turnover.
Shares of Performance Food Group ( PFGC ) fell 1.08% in premarket trading on Tuesday and Sysco ( SYY ) dipped 0.55% , while US Foods ( USFD ) gained 2.55% .
More on food service stocks:
- Performance Food Group: Beneficial Guidance For 2025 And Undervalued
- Sysco: Boring Company With Expanding Margins And Industry-Leading Growth
- US Foods Holding: Coming To Life Again
- Seeking Alpha's Quant Ratings across the food service sector
For further details see:
Food service stocks: US Foods upgraded at Morgan Stanley, Performance Food cut