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Investing.com -- Wells Fargo has identified the top food distribution stocks to watch following the recent announcement that US Foods Holding and Performance Food Group have terminated their potential merger discussions. Both companies have reiterated their guidance despite recent market challenges, signaling confidence in their standalone strategies. The food service sector appears poised for improvement with easier industry comparisons beginning in December and potential consumer stimulus from tax cuts in the first half of 2026.
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US Foods Holding (NYSE:USFD)
US Foods and Performance Food Group recently agreed to end their information sharing process and no longer intend to pursue a merger. As part of this update, US Foods reiterated its three-year (2025-2027) algorithm and announced both a $250 million accelerated share repurchase program and a new $1 billion repurchase authorization. The company had previously paused share repurchases partially through the third quarter after buying back $275 million in July and $60 million in August. Wells Fargo analysts believe US Foods should benefit from the removal of deal-related uncertainties, including concerns about a lengthy FTC review process and divestiture requirements. The bank considers US Foods to be in a strong position even without the merger.
In recent news, US Foods Holding reported third-quarter adjusted earnings of $1.07 per share, surpassing analyst expectations, on revenue of $10.19 billion. Following the results, CFRA lowered its price target on the company due to a reduced sales outlook, while Bernstein reiterated an Outperform rating.
Performance Food Group (NYSE:PFGC)
Performance Food Group has reiterated both its Q2 and fiscal year 2026 guidance despite recent market headwinds. Wells Fargo analysts suggest that while Performance Food Group might see some premium unwind following the terminated merger discussions, the company remains well-positioned for growth. The bank recommends aggressive buying of Performance Food Group shares, citing self-help momentum, upcoming fiscal tailwinds in 2026, and appealing valuations. Like US Foods, Performance Food Group appears to have solid standalone prospects that didn’t necessitate a merger.
Performance Food Group saw its price target raised by Piper Sandler to $116 following solid fiscal first-quarter 2026 results that included 11% top-line growth. Bernstein also reiterated an Outperform rating on the company, highlighting strong performance in its foodservice division.
Sysco Corporation (NYSE:SYY)
While the termination of merger talks between US Foods and Performance Food Group represents a setback for Sysco, Wells Fargo maintains a positive outlook on the company. Analysts note that Sysco now faces two ambitious competitors that have demonstrated impressive momentum, potentially at Sysco’s expense. However, the bank points to improving execution at Sysco, easy year-over-year comparisons, expected benefits from fiscal tailwinds in 2026, and an attractive stock valuation. Though Wells Fargo places Sysco at the bottom of its food service rankings, it maintains an Overweight rating on the stock.
Sysco Corporation reported first-quarter fiscal 2026 earnings of $1.15 per share, which exceeded analyst forecasts, on revenue of $21.1 billion. The company also announced that its Global Chief Operating Officer will transition to a senior advisor role effective January 1, 2026.
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