Performance Food Group Company PFGC reported fourth-quarter fiscal 2023 results, wherein the bottom line beat the Zacks Consensus Estimate, while the top line missed the same. Markedly, both metrics grew year over year. This Richmond, Virginia-based company also registered an increase in the total case volume.
The noteworthy development in the fiscal fourth quarter was the 7.6% increase in case volume for the organic independent restaurant segment. This success can be attributed to the fruitful investments made in Performance Food Group's salesforce, resulting in tangible market share advancements.
Shares of this Zacks Rank #3 (Hold) company have advanced 9.7% in the past three months against the industry’s growth of 9.3%.
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A Closer Look at Results
Performance Food Group posted fiscal fourth-quarter earnings of $1.14 per share, which beat the Zacks Consensus Estimate of $1.13 and increased from earnings of $1.07 reported in the prior-year period.
Total revenues of $14,865.2 million rose 1.9% year over year and missed the Zacks Consensus Estimate of $15,092 million. The increase in net sales was primarily attributable to channel mix, growth in cases sold, and an increase in selling price per case as a result of inflation.
In the fourth quarter of fiscal 2023, the overall organic case volume rose 1.8% from the prior-year quarter. The increase was driven by a 7.6% improvement in cases from organic independent sources, an expansion in Performance Brands cases and widespread growth across Vistar’s various channels, offset by declines in the Foodservice Chain business.
Performance Food Group Company Price, Consensus and EPS Surprise
Performance Food Group Company price-consensus-eps-surprise-chart | Performance Food Group Company Quote
Margins & Expenses
Gross profit grew 12.0% year over year to $1.7 billion in fourth-quarter fiscal 2023. This increase can be attributed to the favorable shift in the mix of cases sold and growth in the independent channel. The gross margin expanded 120 basis points (bps) to 11.4% year over year.
Operating expenses experienced a 5.2% year-over-year increase, reaching $1.4 billion. This rise mainly stemmed from higher personnel costs, primarily encompassing wages, commissions and benefits, as well as increased expenditure for repairs and maintenance. Notably, operating expenses also included a loss of $7.6 million from the sale of a warehouse facility.
Adjusted EBITDA improved 7.9% year over year to $385.2 million. The adjusted EBITDA margin expanded 20 bps to 2.6% year over year.
Foodservice: Segmental net sales declined 1.1% year over year to $7.3 billion in the fiscal fourth quarter. The decline mainly resulted from lower selling prices per case due to deflation, particularly driven by reduced prices for items like poultry, cheese and eggs. However, this was partially negated by higher case volume.
Adjusted EBITDA for Foodservice increased 1.7% to $273.3 million from the prior-year period.
Vistar: Segmental net sales increased 18.3% year over year to $1.2 billion in the fiscal fourth quarter. The increase was driven by higher selling prices per case due to inflation and channel mix, as well as case volume growth.
Adjusted EBITDA at Vistar increased 31.5% to $85.6 million from the prior-year period. The increase was driven by a 15.8% increase in gross profit.
Convenience: The segment's net sales grew 2.3% year over year to $6.3 billion in the fiscal fourth quarter. Net sales from cigarettes were $3.8 billion in the quarter, including $1 billion in excise taxes. Sales growth was mainly backed by an increase in selling price per case due to inflation.
Adjusted EBITDA for Convenience decreased 7.6% to $80.7 million compared with the prior-year period.
Other Financial Aspects
Performance Food Group ended fiscal 2023 with a cash balance of $12.7 million, long-term debt of $3.5 billion and shareholders’ equity of $3.7 billion. In fiscal 2023, the company provided $832.1 million in cash flow from operating activities compared with $276.5 million in the prior-year period.
In fiscal 2023, PFG invested $269.7 million in capital expenditure, an increase of $54.2 million from the prior-year period. Also, PFG delivered a free cash flow of $562.4 million.
In fourth-quarter fiscal 2023, the company repurchased 0.2 million shares for $11.2 million, reflecting an average price of $56.06 per share. As of Jul 1, 2023, the company had $288.8 million shares available for repurchase under the current authorization.
For first-quarter fiscal 2024, Performance Food Group anticipates net sales of $14.7-$15 billion. It expects adjusted EBITDA of $360-$380 million.
For fiscal 2024, PFGC projects net sales of $59-$60 billion, with adjusted EBITDA estimated to be $1.45-$1.5 billion.
The company reiterated its previously stated three-year targets for net sales and adjusted EBITDA. PFGC expects to achieve annual net sales of $62-$64 billion. It anticipates adjusted EBITDA of $1.5-$1.7 billion for fiscal 2025.
Picks You Can’t Miss Out On
Here we have highlighted three better-ranked stocks, namely Sprouts Farmers Market, Inc. SFM, Sovos Brands Inc. SOVO and American Eagle Outfitters Inc. AEO.
Sprouts Farmers, which operates in a highly fragmented grocery store industry, currently carries a Zacks Rank #2 (Buy). The expected EPS growth rate for three to five years is 9.3%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Sprouts Farmers’ current financial-year revenues and EPS suggests growth of 5.7% and 14.6%, respectively, from the year-ago reported figures. SFM has a trailing four-quarter earnings surprise of 14.3%, on average.
Sovos is a food company. The company currently carries a Zacks Rank #2. The expected EPS growth rate for three to five years is 13.6%.
The Zacks Consensus Estimate for Sovos Brands’ current financial-year sales and earnings suggests growth of 8.7% and 13.3% from the year-ago period. SOVO has a trailing four-quarter earnings surprise of 15.6%, on average.
American Eagle, a specialty retailer of casual apparel, accessories and footwear, currently carries a Zacks Rank #2. The expected EPS growth rate for three to five years is 9.6%.
The Zacks Consensus Estimate for American Eagle Outfitters’ current fiscal-year earnings suggests growth of 7.2% from the year-ago period. AEO has a trailing four-quarter earnings surprise of 9.2%, on average.
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