US Foods Q1 2025 Earnings: Growth Amid Gaps

US Foods Holding Corp. (USFD) delivered a quarter of strong year-over-year growth, but mixed results against near-term expectations left investors weighing the company’s resilience against lingering risks. The $9.35 billion in Q1 revenue and $0.68 adjusted EPS reflect a path of steady progress, yet minor misses versus consensus estimates and a disappointing performance in chain restaurant sales highlight execution challenges. Here’s what investors need to know.

The Numbers: Growth, Gaps, and Guidance

US Foods’ net income surged 40% to $115 million, while adjusted EPS rose 26% to $0.68—falling just short of the $0.69 Zacks estimate but exceeding another cited $0.59 forecast. The revenue total of $9.35 billion marked a 4.5% year-over-year increase, though it narrowly missed a more granular $9.382 billion estimate.

Operational metrics tell a stronger story:
- Adjusted EBITDA jumped 9% to $389 million, driven by improved gross margins (up to 17.3% from 16.5%) and cost discipline.
- Case volume rose 1.1%, fueled by a 2.5% gain in independent restaurant sales—a bright spot, as chain restaurant volume declined 4.3%, signaling potential weakness in larger clients.

The company also announced a new $1 billion share repurchase program, underscoring confidence in its balance sheet. Net leverage dropped to 2.7x, and operating cash flow hit $391 million, up 23% year-over-year.

Bulls and Bears: Why the Disconnect?

Bulls will focus on the long-term trajectory:
- US Foods has outperformed revenue estimates in 3 of the past 4 quarters.
- The 8–12% full-year EBITDA growth guidance aligns with its operational momentum.
- The Zacks Food – Miscellaneous industry ranks in the top 34% of all sectors, historically outperforming.

Bears, however, note near-term risks:
- The Zacks Rank’s “Sell” rating reflects negative earnings estimate revisions ahead of the report.
- Chain volume weakness could persist if larger clients face macroeconomic pressures.
- The stock’s YTD gain of 2.5% lags its 2024 performance, suggesting traders are cautious on valuation.

CEO Flitman’s Take: Execution Amid Challenges

CEO Dave Flitman emphasized the company’s “strong execution” and “robust customer value proposition,” pointing to margin expansion and cash flow improvements. The focus on independent restaurants—a segment less susceptible to economic volatility—could provide a buffer against broader industry headwinds.

Yet, the 4.3% decline in chain volume raises questions about US Foods’ ability to retain large clients. If this trend continues, it could pressure future sales growth, even as the independent segment outperforms.

Conclusion: A Buy for the Long Game?

US Foods’ Q1 results paint a company in transition: delivering on cost management and capital returns while navigating sector-specific headwinds. The 18–23% adjusted EPS growth guidance for -2025 suggests management sees further upside, but the Street’s skepticism is evident.

Investors should consider three key factors:
1. Chain Volume Recovery: A rebound in large client sales could unlock higher revenue growth.
2. Margin Sustainability: The 17.3% gross margin is a positive sign, but inflation or supply chain shifts could test this.
3. Valuation: At 16x trailing EBITDA (vs. peers at 14–18x), USFD isn’t cheap, but its growth profile justifies some premium.

For now, US Foods remains a “Hold” for most investors. The stock’s resilience in a tough quarter underscores its operational strengths, but the path to outperforming will require closing the gap between expectations and execution in key segments. With the $1 billion buyback and strong cash flow, the company is well-positioned—if it can deliver on its guidance.