US Foods (USFD)

Food distribution giant US Foods (NYSE:USFD) met Wall Streets revenue expectations in Q3 CY2025, with sales up 4.8% year on year to $10.19 billion. Its non-GAAP profit of $1.07 per share was 3.7% above analysts’ consensus estimates.

Company Overview

With a fleet of over 6,500 trucks delivering everything from fresh produce to frozen entrées, US Foods (NYSE:USFD) is a major foodservice distributor that supplies food products and services to approximately 250,000 restaurants, healthcare facilities, hotels, and educational institutions across the United States.

Distributors serve as intermediaries connecting manufacturers with retailers or end customers, managing logistics, inventory, and fulfillment across various product categories. Tailwinds include supply chain complexity driving demand for specialized distribution expertise, e-commerce growth requiring robust fulfillment networks, and businesses outsourcing logistics to focus on core operations. Consolidation opportunities may benefit scale players. Headwinds include margin pressure from powerful suppliers and customers, competition from manufacturers selling direct, and rising transportation and labor costs. Additionally, economic downturns reduce demand volumes, while inventory management challenges and potential supply chain disruptions introduce operational risks requiring sophisticated systems.

US Foods competes primarily with Sysco Corporation (NYSE: SYY), Performance Food Group (NYSE: PFGC), and Gordon Food Service (private), along with numerous regional distributors in the fragmented foodservice supply market.

A company’s long-term performance is an indicator of its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Over the last five years, US Foods grew its sales at a 10.6% compounded annual growth rate. Although this growth is acceptable on an absolute basis, it fell short of our standards for the consumer discretionary sector, which enjoys a number of secular tailwinds.

Long-term growth is the most important, but within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends and consumer preferences. US Foods’s recent performance shows its demand has slowed as its annualized revenue growth of 5.5% over the last two years was below its five-year trend.

US Foods also reports its number of units sold. Over the last two years, US Foods’s units sold averaged 3.2% year-on-year growth. Because this number is lower than its revenue growth, we can see the company benefited from price increases.

This quarter, US Foods grew its revenue by 4.8% year on year, and its $10.19 billion of revenue was in line with Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 5% over the next 12 months, similar to its two-year rate. This projection is underwhelming and implies its newer products and services will not lead to better top-line performance yet.

Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

US Foods’s operating margin might fluctuated slightly over the last 12 months but has generally stayed the same, averaging 3% over the last two years. This profitability was inadequate for a consumer discretionary business and caused by its suboptimal cost structure.

In Q3, US Foods generated an operating margin profit margin of 2.8%, in line with the same quarter last year. This indicates the company’s overall cost structure has been relatively stable.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

US Foods’s EPS grew at a solid 39.7% compounded annual growth rate over the last five years, higher than its 10.6% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

In Q3, US Foods reported adjusted EPS of $1.07, up from $0.85 in the same quarter last year. This print beat analysts’ estimates by 3.7%. Over the next 12 months, Wall Street expects US Foods’s full-year EPS of $3.78 to grow 18%.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

US Foods has shown poor cash profitability over the last two years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 2.2%, lousy for a consumer discretionary business.

US Foods’s free cash flow clocked in at $236 million in Q3, equivalent to a 2.3% margin. This cash profitability was in line with the comparable period last year and its two-year average.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

US Foods historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 6.7%, somewhat low compared to the best consumer discretionary companies that consistently pump out 25%+.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, US Foods’s ROIC has increased. This is a good sign, and we hope the company can continue improving.

US Foods reported $56 million of cash and $5.12 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $1.88 billion of EBITDA over the last 12 months, we view US Foods’s 2.7× net-debt-to-EBITDA ratio as safe. We also see its $307 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

It was good to see US Foods beat analysts’ EPS expectations this quarter. Zooming out, we think this was a decent quarter. The stock remained flat at $85.70 immediately following the results.

Updated: January 30, 2026 at 12:00 AM EST

The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in US Foods.

We cheer for all companies serving everyday consumers, but in the case of US Foods, we’ll be cheering from the sidelines. First off, its revenue growth was weak over the last five years, and analysts expect its demand to deteriorate over the next 12 months. And while its solid EPS growth over the last five years shows its profits are trickling down to shareholders, the downside is its . On top of that, its relatively low ROIC suggests management has struggled to find compelling investment opportunities.

US Foods’s P/E ratio based on the next 12 months is 18.7x. While this valuation is fair, the upside isn’t great compared to the potential downside. There are more exciting stocks to buy at the moment.

Wall Street analysts have a consensus one-year price target of $91.63 on the company (compared to the current share price of $84.26).