Performance Food: Fiscal Q1 Earnings Snapshot

Performance Food Group Company (PFGC) reported its fiscal Q1 2025 earnings on November 6, 2024, with mixed results that highlight the company's growth potential and undervalued status. While net income missed analyst estimates, PFGC's strong performance in key segments and positive outlook suggest continued growth and an attractive investment opportunity.

PFGC's net sales grew 3.2% to $15.4 billion, beating analyst estimates of $15.31 billion. Gross profit improved 6.1% to $1.8 billion, driven by recent acquisitions, cost optimization strategies, and a favorable shift in case mix. However, net income decreased 10.5% to $108 million, missing estimates of $1.21 per share. Adjusted EBITDA rose 7.3% to $411.9 million, topping expectations of $408.7 million.


The company's Foodservice segment, which includes recent acquisitions Cheney Bros. and José Santiago, saw a 13.8% increase in Adjusted EBITDA, driven by a 5.7% increase in net sales and a 7.8% increase in independent case volume. This growth was primarily attributed to the acquisitions, a favorable shift in the mix of cases sold, and growth in cases sold, including more Performance Brands products sold to independent customers.


PFGC's cost optimization strategies and shift in case mix significantly contributed to its Q1 2025 gross profit. The company reported a 6.1% increase in gross profit, driven by recent acquisitions, cost of goods sold optimization through procurement efficiencies, a favorable shift in the mix of cases sold, and growth in cases sold. This strategy allowed PFGC to maintain its gross profit margin despite facing higher product cost inflation of approximately 5.0%.

The main factors driving the increase in PFGC's operating expenses in Q1 2025 were recent acquisitions and increases in personnel expense, including wages, commissions, benefits, and insurance expense. This was partially offset by a decrease in fuel expense. Additionally, depreciation and amortization increased due to recent acquisitions, an increase in transportation equipment under finance leases, and accelerated amortization of certain customer relationships and trade names.

PFGC maintained its fiscal 2025 outlook, with net sales expected in the range of $62.5 billion to $63.5 billion and Adjusted EBITDA in the range of $1.7 billion to $1.8 billion. The company's strong performance in the Foodservice segment and positive outlook suggest continued growth and undervaluation, making it an attractive investment opportunity.

In conclusion, PFGC's fiscal Q1 2025 earnings snapshot reveals a company with strong growth potential and an undervalued status. Despite a slight miss in net income, the company's robust performance in key segments and positive outlook indicate that PFGC is well-positioned for continued success. Investors seeking undervalued opportunities with strong growth potential should consider adding PFGC to their watchlist.