BTIG reiterates Buy rating on US Foods stock amid PFG acquisition rumors

Investing.com - BTIG has reiterated its Buy rating and $82.00 price target on US Foods (NYSE:USFD) amid recent speculation about a potential acquisition of Performance Food Group (NYSE:PFGC), which currently trades at $95.02 and has seen a strong 41% return over the past year.

The research firm addressed market rumors regarding US Foods potentially acquiring Performance Food Group, noting that such a combination would merge the second and third largest food distributors in the country. Performance Food Group, with its $14.85 billion market capitalization and $57.9 billion in revenue, currently trades at a relatively high P/E multiple of 39x. According to InvestingPro analysis, the stock appears to be trading above its Fair Value.

BTIG analyst Peter Saleh indicated that a transaction of this magnitude would likely face "significant regulatory scrutiny" due to the direct competition between the companies and their substantial geographic overlap in the market.

The firm also observed that any acquisition of Performance Food Group would likely require primarily equity funding, as additional debt would be insufficient given the current leverage and enterprise value of both companies.

While maintaining its Buy rating on US Foods with an $82 price target, BTIG stated it remains Neutral on shares of Performance Food Group.

In other recent news, Performance Food Group has attracted takeover interest from US Foods, according to a Bloomberg report. This potential acquisition has yet to be confirmed by either company but could lead to significant changes in the food distribution sector if it materializes. Meanwhile, BMO Capital Markets has maintained an Outperform rating for Performance Food Group with a target price of $105, based on the company’s ambitious growth targets and strong strategic initiatives. Morgan Stanley (NYSE:MS) has also adjusted its price target for the company to $93, citing alignment with new financial targets and a consistent strategy.

Citi continues to support Performance Food Group with a Buy rating and a $121 target, highlighting the company’s solid financial plan and strategic focus on mergers and acquisitions. Additionally, Performance Food Group announced a new $500 million share repurchase program, superseding its previous $300 million program. The company maintains its fiscal 2025 net sales forecast at $63 billion to $63.5 billion, with Adjusted EBITDA expected to be between $1.725 billion and $1.75 billion. Looking ahead, Performance Food Group projects annual sales to reach between $73 billion and $75 billion by fiscal 2028, with Adjusted EBITDA ranging from $2.3 billion to $2.5 billion.

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