Below is a brief excerpt from a complimentary research note written by our Consumables analysts Howard Penney and Daniel Biolsi. We are pleased to announce our new Sector Pro Product Consumables Pro. Click HERE to learn more.
US Foods presented at a conference yesterday. The company guided Q4 adj. EBITDA to be even with Q3, which was $209M, much lower than the consensus expectations of $264M. Legacy case volumes declined 18-20% in November, decelerating since October as seen in the following chart.
Management’s guidance for case volumes was for a decline of 15 to 20%. Since management’s last conference call on Oct. 24th, the change has been the additional indoor dining restrictions.
Management estimates the percentage of restaurants that have closed during the year is in the MSD% range. With the shares up on the day, the sentiment appears that worsening near-term trends from additional lockdowns are soon to be behind us.
Investors are looking forward to when vaccines are widespread and food away from home recovers. The analysis that matters then is future earnings power and whether there have been any structural changes from the pandemic.
Management points to cost savings initiatives taken during the pandemic and additional new customer wins. The majority of the cost savings are from headcount, and the margin profile of the customers gained vs. lost is unclear.
Our projections do not factor in legacy revenue or margins returning to pre-pandemic levels in 2021 or 2022.