US Foods Holding Corp (USFD) Q4 2024 Earnings Call Highlights: Record Earnings and Strategic ...

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Full Year Earnings: Record earnings of $1.74 billion for 2024.
Adjusted EBITDA Margin: Expanded by 22 basis points to 4.6% in 2024.
Adjusted EPS: Record adjusted EPS of $3.15, a 20% growth.
Net Sales: Increased 6.4% to $37.9 billion in 2024.
Fourth Quarter Net Sales: Increased 6.2% to $9.5 billion.
Total Case Volume Growth: 3.5% in the fourth quarter.
Independent Restaurant Case Volume: Increased 3.2% in the fourth quarter.
Healthcare Case Volume Growth: 4.7% in the fourth quarter.
Hospitality Case Volume Growth: 2.4% in the fourth quarter.
Adjusted EBITDA Growth: 13.7% increase in the fourth quarter to $441 million.
Adjusted Gross Profit: Grew 7.3% to $6.6 billion in 2024.
Share Repurchases: Nearly $1 billion in 2024.
Acquisition: $220 million acquisition of IWC in 2024.
Private Label Penetration: Increased to nearly 53% by the end of 2024.
Cash CapEx: $341 million invested in 2024.
Net Leverage: Ended 2024 at 2.8 times.

Warning! GuruFocus has detected 4 Warning Sign with USFD.

Release Date: February 13, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

US Foods Holding Corp (NYSE:USFD) achieved record full-year earnings of $1.74 billion in 2024, surpassing their original long-range plan targets.
The company expanded its adjusted EBITDA margin by 100 basis points to 4.6% and achieved a 20% growth in adjusted EPS.
US Foods Holding Corp (NYSE:USFD) reported a 3.2% increase in total independent case volume, marking the 15th consecutive quarter of share gains with independent restaurants.
The company successfully reduced net leverage to 2.8 times, within their target range of 2 to 3 times.
US Foods Holding Corp (NYSE:USFD) made significant progress in their strategic initiatives, including a $230 million cost of goods savings and a $220 million acquisition of IWC.

Negative Points

The fourth quarter was impacted by external factors such as hurricanes, election, and holiday calendar shifts, leading to a 150 to 200 basis points headwind in independent and hospitality case growth.
Chain restaurant food traffic was down nearly 2% in the fourth quarter, reflecting ongoing challenges in the macro environment.
Despite strong performance, the company faces challenges in maintaining penetration growth due to foot traffic issues throughout 2024.
US Foods Holding Corp (NYSE:USFD) is in the process of exploring the sale of its CHEF'STORE business, which could impact future operations and focus.
The company anticipates a slower macro environment in 2025, which could affect their ability to achieve the higher end of their growth targets.

Q & A Highlights

Q: What percentage of US Foods' offerings are imported, and how would tariffs impact your sourcing strategy? A: David Flitman, CEO, stated that the majority of US Foods' products are produced and distributed in the United States, with only a low to mid-single-digit percentage being imported. Most customer agreements are pass-through, meaning any tariff-related cost increases would likely be passed on to customers. The company focuses on helping customers manage inflation, including any tariff impacts, through various cost-saving initiatives.

Q: How does US Foods plan to achieve independent case growth in the upcoming year? A: David Flitman, CEO, explained that while penetration has been challenging due to foot traffic issues, the majority of growth comes from new account generation. The company had its highest new account generation in December, despite challenges, and expects foot traffic to improve throughout 2025, supporting growth.

Q: Can you elaborate on the expected independent case growth and the factors influencing it? A: David Flitman, CEO, clarified that the 5% to 8% growth target assumes a normalized 2% foot traffic environment, which was not seen in 2024. The company expects improved foot traffic in 2025 and has confidence in achieving its growth targets due to ongoing share gains and strategic initiatives.

Q: What are the expectations for the macroeconomic environment in 2025, and how does it impact your growth projections? A: Dirk Locascio, CFO, mentioned that sources like Technomic predict a healthier macro environment in 2025 compared to 2024. The company expects stability with the election behind and remains focused on controlling controllables and driving share gains across target customer types.

Q: How is US Foods progressing with its Pronto penetration initiative, and what are the expected benefits? A: David Flitman, CEO, explained that Pronto, initially targeting new customers in urban areas, is now being piloted with existing customers to compete against specialty suppliers. The initiative has shown a 20% uplift in sales for participating customers, with profitability in line with broad line operations.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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