Performance Food Group Co. PFGC is one of the largest food distributors in the United States. The company sources, markets and delivers food and food-related products to over 125,000 food service businesses through a network of over 150 distribution facilities. The company is acquiring food distributor Cheney Brothers for $2.1 billion, which will expand its presence among restaurant and hospitality customers in the southeastern United States. The drop in inflation below 3% and the upcoming interest rate cuts are positive tailwinds that the market is expecting for the company.

Disinflation should not be confused with deflation

Performance Food Group benefits from disinflation, which is not to be confused with deflation. Disinflation occurs when the rate of inflation slows down, meaning that prices are still rising but at a slower rate. For example, when inflation falls from 9% to 2.9%, as shown by the latest Consumer Price Index (CPI) for July. Disinflation lowers input costs and improves gross margins. It also improves demand and the purchasing power of companies. Interest rate cuts are said to have a disinflationary effect.

Deflation occurs when general prices actually fall. This can lead to a negative inflation rate, which can harm the economy. Deflation occurs during severe economic downturns.

The Performance Food Group operates in the retail and wholesale sector and competes with food retailers such as Sysco Co. SY, United Natural Foods Inc. UNFIAnd SpartanNash Co. SPTN.

The exclusive brand portfolio of Performance Food

The company has exclusive brands in its Performance Foodservice segment, with categories such as Center of Plate (COP) and Seafood. These brands provide beef, poultry and seafood to upscale luxury steakhouses, fast-food burger restaurants and food trucks. Its exclusive seafood brands include the premium brands Bay Winds, Empire’s Treasure, The Fresh Catch and World Dock.

The Bakery & Desserts category includes exclusive products from Heritage Ovens, Sweet Encore, Piancone and Roma Gelato, Tiramisu, Cannoli, and coffee and espresso from Italy. Performance sells thousands of products from condiments to freshly caught fish from over 100 exclusive brands, including custom-cut meats. Customers include restaurants, convenience stores, hotels, schools, universities, retail, senior living facilities and healthcare facilities.

PFGC stock returns to an ascending parallel price channel

The daily candlestick chart for PFGC shows an ascending price channel pattern. The ascending upper trendline connects the higher highs and the lower trendline connects the higher lows. While PFGC fell out of the channel before the earnings release, the price gap from $67.34 to $70.73 brought shares firmly back into the channel. The daily relative strength index (RSI) rose to the 70 band. Pullback support levels are at $70.73, $67.34 gap fill, $65.19, and $63.35.

The trend reversal is accelerating

Performance Food Group reported fourth-quarter 2024 earnings per share of $1.45, beating consensus estimates of $1.37 by 8 cents. Adjusted EBITDA rose 18.4% to $456.2 million. Revenue increased 2.3% year-over-year to $15.2 billion from $15.25 billion. Total case volume increased 1.1% year-over-year. Organic foodservice case volume increased 3.7%. Net income increased 10.9% year-over-year to $166.5 million. Overall, product cost inflation for the foodservice business increased 2.9% in the quarter. Foodservice segment revenue increased 4.6% to $7.7 billion. The Vistar segment saw net revenue decrease 1.8% to $1.2 billion. Convenience segment net sales decreased 0.5% year-on-year to USD 6.3 billion.

Performance Food Group issues mixed forecast

For the first quarter of fiscal 2025, Performance Food Group issued revenue guidance of $15.2 billion to $15.5 billion, versus consensus of $15.54 billion. Adjusted EBITDA is expected to be approximately $400 million to $425 million. Jose Santiago’s business results are expected to be added to the quarter.

For fiscal 2025, the company expects revenue of $60 billion to $61 billion, versus consensus estimates of $60.83 billion. Adjusted EBITDA for fiscal 2025 is expected to be in the range of $1.6 billion to $1.7 billion.

George Holm, CEO of Performance Food Group, commented on the two recent acquisitions: “Although small compared to PFG’s overall business, we believe José Santiago will have an immediate positive impact on earnings, cash flow and margins. Taken together, we believe these two businesses position PFG very well for future growth in the Southeastern United States and Caribbean territories.”

The article “Performance Food Group Sees Tailwind from Disinflation in 2025” first appeared on MarketBeat.