Performance Food Group: A Culinary Giant Riding a Growth Wave

The food distribution sector is no longer about just delivering groceries—it's about leveraging scale, operational excellence, and strategic acquisitions to dominate a $63 billion opportunity. Performance Food Group (PFGC) is proving this thesis in spades, with its recent Investor Day presentations and third-quarter results laying out a clear path to sustained margin expansion and shareholder value creation. Let's dissect why PFGC is now a buy for investors seeking both growth and income.

Investor Day 2025: A Roadmap to Margin Dominance

PFGC's May 28 Investor Day was a masterclass in strategic transparency. The company revised its 2025 outlook to net sales of $63–63.5 billion and Adjusted EBITDA of $1.725–1.75 billion, a $25 million tightening of its previous guidance. This reflects confidence in its ability to offset inflationary headwinds and integration costs with operational efficiency gains.

The $500 million share buyback announced alongside these targets is a bold move, signaling management's belief in PFGC's undervalued stock. With $166 million remaining from its prior $300 million repurchase program, the new authorization—valid through 2029—ensures consistent capital returns to shareholders.

Cheney Brothers Integration: Fueling Growth, Not Just Costs

The $1.6 billion acquisition of Cheney Brothers has been a linchpin of PFGC's strategy. While integration risks (retention, synergies, costs) remain, the third-quarter results prove execution is on track:

• Sales Growth: Q3 net sales jumped 10.5% to $15.3 billion, with Cheney Brothers contributing significantly to the 19.2% surge in the Foodservice segment.
• Margin Expansion: Adjusted EBITDA rose 20.1% to $385.1 million, driven by procurement efficiencies and a favorable shift in case mix (e.g., higher-margin independent Foodservice sales).
• Long-Term Leverage: The 3-year outlook projects $73–75 billion in sales by 2028 and $2.3–2.5 billion in Adjusted EBITDA, with Cheney's scale now embedded into PFGC's operations.

Operational Excellence: The Engine of Margin Expansion

PFGC isn't just buying growth—it's refining execution to boost profitability:

1. Procurement & Pricing Power: Gross profit rose 16.2% in Q3, aided by strategic cost management and inflation-driven price hikes.
2. Segment Synergy:
3. Foodservice: Adjusted EBITDA up 29%, fueled by Cheney's contributions and a 20% rise in independent case volume.
4. Convenience: Despite modest sales growth, Adjusted EBITDA rose 5.4% via cost controls.
5. Debt Management: While long-term debt rose post-acquisition, free cash flow remains robust at $494 million, supporting both integration and shareholder returns.

Why Buy PFGC Now?

The market may be overlooking PFGC's dual strengths: execution and capital discipline. Here's why this is a buy:

• Valuation: At current levels, PFGC trades at a 10x forward EV/EBITDA, below its historical average. The $500M buyback will further compress this multiple.
• Defensible Model: With over 300,000 customer locations and 150 distribution centers, PFGC's scale insulates it from competition.
• Catalysts Ahead: Fourth-quarter results will test PFGC's ability to sustain momentum, but the stock's 15% dividend yield (post-buybacks) adds a safety net.

Risks, But Not Showstoppers

Integration delays or supply chain disruptions could pressure margins, but PFGC's third-quarter resilience—despite higher depreciation and interest costs—suggests management is ahead of these risks.

Conclusion: PFGC Is a Culinary Stock to Own for Years

PFGC's Investor Day and Q3 results confirm it's no longer just a distributor—it's a profit machine. With Cheney Brothers integrated, a shareholder-friendly buyback, and a clear path to $2.5 billion EBITDA by 2028, this stock offers both growth and income. For income investors, the dividend yield is a bonus; for growth investors, the margin expansion story is just beginning.

Action Item: Buy PFGC now before the market catches up to its full potential.

Disclaimer: Always conduct your own research before making investment decisions.