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Core Viewpoint - Performance Food Group Company (NYSE:PFGC) is recognized as one of the best FMCG stocks to invest in, despite a recent price target reduction by UBS from $120 to $108 while maintaining a "Buy" rating, indicating a stable growth outlook for the company [1]. Financial Performance - For Q2 2026, Performance Food Group reported a 5.2% year-over-year increase in net sales, reaching $16.4 billion, driven by higher case sales and increased selling prices per case [3]. - The company's total case volume rose by 3.4% year-over-year, with organic case volume increasing by 2.8% due to a 5.3% rise in organic independent cases [2]. - Net income for Q2 2026 increased by $19.3 million year-over-year to $61.7 million, supported by higher gross profit, although this was partially offset by increased operating expenses, income taxes, and interest expenses [3]. Future Outlook - For Q3 2026, Performance Food Group anticipates net sales to be between approximately $16.0 billion and $16.3 billion, indicating continued growth in the upcoming quarter [4].

Core Viewpoint - Performance Food Group Company announced the pricing of its offering of $1.06 billion aggregate principal amount of 5.625% Senior Notes due 2034, with the offering expected to close on February 19, 2026, subject to customary closing conditions [1]. Group 1 - The offering consists of 5.625% Senior Notes due 2034 [1]. - The total amount of the offering is $1.06 billion [1]. - The net proceeds from the offering will be utilized by the company for unspecified purposes [1].

Core Viewpoint - Performance Food Group Company announced the intention to offer $1.06 billion in Senior Notes due 2034 to redeem outstanding 5.500% Senior Notes [1] Group 1 - The offering is subject to market and other conditions [1] - The net proceeds from the offering will be used alongside borrowings from the revolving credit facility [1] - The Issuer is an indirect wholly-owned subsidiary of Performance Food Group Company [1]

Core Insights - The company remains confident in its long-term targets, focusing on market share gains, margin enhancement, and operating leverage, with technology as a key area of focus alongside organic growth and acquisitions [1][6] - CEO Scott McPherson emphasized the commitment to a three-year strategic plan that balances revenue growth with gross margin initiatives and improved operating leverage [3][6] - The company reported fiscal second-quarter 2026 results within prior guidance despite a challenging macro environment, including declining restaurant foot traffic and a government shutdown [4][7] Financial Performance - Total net sales increased by 5.2% and cases rose by 3.4%, with net income up 45.5% to $61.7 million and adjusted EBITDA climbing 6.7% to $451 million [7][9] - The company updated its fiscal 2026 targets to net sales of $67.25 billion to $68.25 billion and adjusted EBITDA of $1.875 billion to $1.975 billion [24] Segment Performance - The Foodservice segment achieved 5.3% organic independent case growth, driven by strong performance in chicken, burger, barbecue, and seafood restaurant concepts [11] - The Convenience segment saw net sales rise by 6.1%, with adjusted EBITDA increasing by 13.4%, attributed to cost discipline and contributions from new store onboardings [14][15] - The Specialty segment faced challenges, particularly from theater sales, which were down over 30%, representing a $50 million headwind to overall sales [16] Cost and Inflation Insights - Total company cost inflation was approximately 4.5% in the quarter, with foodservice inflation at 1.8% and specialty inflation at 5.4% [17] - Management expects inflation to remain in the low- to mid-single-digit range through fiscal 2026, with notable deflation in cheese and poultry categories [18] Cash Flow and Capital Allocation - Operating cash flow for the first half of fiscal 2026 totaled $456 million, up $77 million year-over-year, with free cash flow at approximately $264 million [19] - The company prioritized debt reduction in its capital allocation strategy, with no share repurchases during the quarter [19] Guidance and Outlook - For the fiscal third quarter, the company guided to net sales of $16.0 billion to $16.3 billion and adjusted EBITDA of $390 million to $410 million, considering ongoing challenges in specialty and recent winter storms [20] - The company reiterated its fiscal 2028 targets of $73 billion to $75 billion in sales and adjusted EBITDA of $2.3 billion to $2.5 billion [20]

Financial Performance - Net sales for the three months ended December 27, 2025, were $16,444.7 million, an increase of 5.2% compared to $15,638.2 million for the same period in 2024[16] - Gross profit for the six months ended December 27, 2025, was $3,983.0 million, up from $3,592.0 million in the prior year, reflecting a 10.9% increase[16] - Net income for the three months ended December 27, 2025, was $61.7 million, compared to $42.4 million for the same period in 2024, representing a 45.4% increase[16] - Operating profit for the three months ended December 27, 2025, was $190.1 million, an increase from $158.8 million in the prior year, marking a 19.7% growth[16] - Net income for the six months ended December 27, 2025, was $155.3 million, an increase of 2.9% from $150.4 million for the same period in 2024[24] - The company reported a total comprehensive income of $62.6 million for the three months ended December 27, 2025, compared to $40.0 million for the same period in 2024[19] - Basic earnings per share for the six months ended December 27, 2025, were $1.00, compared to $0.97 for the same period in 2024[16] - The company reported a net income before taxes of $86.7 million for Q4 2025, compared to $56.7 million in Q4 2024, marking a significant increase of 52.7%[103] Assets and Liabilities - Total assets as of December 27, 2025, were $18,182.8 million, an increase from $17,881.2 million as of June 28, 2025[14] - Total liabilities increased to $13,534.2 million as of December 27, 2025, compared to $13,408.8 million as of June 28, 2025[14] - Retained earnings rose to $1,798.4 million as of December 27, 2025, from $1,643.1 million as of June 28, 2025[14] - As of December 27, 2025, total debt, excluding current installments, was $5,274.1 million, down from $5,388.8 million as of June 28, 2025[48] - The fair value of long-term debt was $5,305.7 million as of December 27, 2025, compared to a carrying value of $5,274.1 million[72] Cash Flow and Investments - The company’s cash position decreased to $41.0 million as of December 27, 2025, from $78.5 million as of June 28, 2025[14] - Net cash provided by operating activities increased to $456.0 million, up 20.4% from $379.0 million in the prior year[24] - Cash paid for interest during the year was $207.4 million, compared to $146.3 million in the previous year, reflecting a significant increase[25] - Net cash used in investing activities was $251.6 million, a decrease from $2,736.7 million in the prior year, indicating a significant reduction in investment outflows[24] - The company reported a net decrease in cash and restricted cash of $37.2 million, compared to a decrease of $9.0 million in the same period last year[24] Shareholder Actions - The company authorized a share repurchase program of up to $500 million, replacing a previous program of $300 million, with $500 million remaining available as of December 27, 2025[29] - The company had total purchase obligations of $273.2 million as of December 27, 2025, including commitments for capital projects and services[157] - The company has $500 million remaining available for share repurchases under the authorized program as of December 27, 2025[181] Segment Performance - Segment Adjusted EBITDA for Foodservice was $292.1 million in Q4 2025, up from $285.1 million in Q4 2024, indicating a year-over-year increase of 1.9%[103] - Foodservice segment net sales increased by $1,868.7 million, or 11.6%, for the first six months of fiscal 2026 compared to the prior year[137] - Convenience segment net sales rose by $586.7 million, or 4.8%, for the first six months of fiscal 2026[137] - Specialty segment net sales increased by $8.6 million, or 0.3%, in the first half of fiscal 2026, primarily due to higher selling prices despite a decline in theater sales[147] Tax and Legal Matters - The Company's effective tax rate was 28.8% for the three months ended December 27, 2025, compared to 25.2% for the same period in 2024, and 25.4% for the six months ended December 27, 2025, compared to 26.1% for the same period in 2024[76] - The Company had net deferred tax assets of $250.9 million and deferred tax liabilities of $1,154.4 million as of December 27, 2025, reflecting changes due to modifications of U.S. tax law[77] - The Company is engaged in various legal proceedings, but management does not believe the outcomes will materially affect its financial position[81] Market and Strategic Outlook - The company serves both independent and multi-unit customers in the restaurant industry, distributing a wide range of food and food-related products across North America[28] - Future strategies include focusing on independent sales, expanding geographies, and pursuing strategic acquisitions to drive growth[121] - The food distribution market structure favors larger distributors, allowing the company to benefit from economies of scale and enhance customer satisfaction[121] - The company is currently evaluating the impact of several recently issued accounting standards on its future consolidated financial statements[33][35][38]

Core Insights - Performance Food Group (PFGC) reported revenue of $16.44 billion for the quarter ended December 2025, marking a year-over-year increase of 5.2% [1] - The earnings per share (EPS) for the same period was $0.98, unchanged from the previous year, but below the consensus estimate of $1.07, resulting in an EPS surprise of -8.09% [1] - The reported revenue fell short of the Zacks Consensus Estimate of $16.56 billion, leading to a surprise of -0.71% [1] Revenue Breakdown - Convenience revenue reached $6.33 billion, exceeding the two-analyst average estimate of $6.24 billion, with a year-over-year change of +6.1% [4] - Foodservice revenue was reported at $8.8 billion, below the estimated $9.01 billion from two analysts [4] - Intersegment Eliminations revenue was -$181.4 million, slightly worse than the estimated -$175.96 million, but showed a year-over-year improvement of +5.2% [4] - Corporate & All Other revenue was $239.7 million, marginally below the average estimate of $240.64 million, reflecting a -0.2% change year over year [4] - Specialty revenue totaled $1.25 billion, slightly below the estimated $1.26 billion, with a year-over-year increase of +1.5% [4] Stock Performance - Shares of Performance Food have returned +11% over the past month, significantly outperforming the Zacks S&P 500 composite, which saw a change of +0.9% [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating expected performance in line with the broader market in the near term [3]

Financial Data and Key Metrics Changes - PFG's total net sales grew by 5.2% in Q2 2026, with total company cases increasing by 3.4% [20][24] - Net income reached $61.7 million, a 45.5% increase year-over-year [24] - Adjusted EBITDA increased by 6.7% to $451 million, with diluted earnings per share at $0.39 and adjusted diluted earnings per share flat at $0.98 year-over-year [24][25] Business Line Data and Key Metrics Changes - Food service segment delivered 5.3% organic independent case growth, driven by a 5.8% independent account growth [9][20] - Convenience segment net sales increased by 6.1%, benefiting from market share gains and onboarding of new accounts [15][20] - Specialty segment saw sales growth tempered by a 30% decline in theater, but other channels grew at a high single-digit to low double-digit rate [17][20] Market Data and Key Metrics Changes - Industry-wide foot traffic decelerated, with December traffic down 3.5% [10] - Convenience segment sales were driven by low single-digit dollar growth from food and mid-teen growth in non-combustible nicotine products [16][20] - Total company cost inflation was approximately 4.5%, with food service inflation at 1.8% and convenience inflation at 7.4% [21][23] Company Strategy and Development Direction - PFG's three-year strategic vision focuses on revenue growth, market share gains, gross margin enhancement, and improving operating leverage [8] - The company aims to achieve sales in the range of $73-$75 billion and adjusted EBITDA between $2.3 billion and $2.5 billion by fiscal 2028 [28] - The integration of Cheney Brothers is expected to contribute significantly to revenue and profit growth in the long term, with synergies anticipated to flow through in years two and three [12][13] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to drive growth and EBITDA performance despite a challenging macro environment [9][18] - The company anticipates a modest sequential decline in net interest expense and expects to maintain a tax rate close to historical averages [25][27] - Management remains optimistic about achieving the full-year guidance despite challenges in Q2, with expectations for a strong second half of the year [28][29] Other Important Information - The company generated $456 million of operating cash flow in the first half of 2026, an increase of $77 million compared to the same period last year [25][26] - PFG did not repurchase any shares in the quarter, prioritizing debt reduction while maintaining a robust M&A pipeline [26] Q&A Session Summary Question: Can you provide additional color on performance by month for organic independent case growth? - Management noted strong performance in October, followed by impacts from the government shutdown in November and December, with a rebound in January despite weather challenges [33][34] Question: How did the pace of your sales force growth compare to recent quarters? - The sales force grew at approximately 6%, with consistent market share gains in independent accounts [35][36] Question: Can you discuss the dynamics at play for the food service business in Q2? - Management highlighted strong independent growth but noted higher-than-expected costs related to the Cheney acquisition and deflation in cheese and poultry impacting margins [40][42] Question: What is the outlook for the convenience segment's EBITDA margins? - Management expressed optimism about margin expansion due to growth in food service and the shift towards non-combustible nicotine products [44][46] Question: How is the integration of Cheney progressing? - The integration is on track, with some costs running higher than anticipated due to infrastructure investments, but overall performance is satisfactory [41][42] Question: What is the company's approach to M&A following the Cheney acquisition? - Management confirmed no change in M&A strategy, emphasizing collaboration and careful integration of acquisitions [57][58] Question: How does deflation impact margins? - Deflation primarily affects margins, particularly in cheese and poultry, where oversupply has led to lower prices [51][52]

Financial Data and Key Metrics Changes - PFG's total net sales grew by 5.2% in Q2 2026, with total company cases increasing by 3.4% [19] - Net income reached $61.7 million, a 45.5% increase year-over-year [21] - Adjusted EBITDA increased by 6.7% to $451 million, with diluted earnings per share at $0.39 and adjusted diluted earnings per share flat at $0.98 year-over-year [22] Business Line Data and Key Metrics Changes - Food service segment delivered 5.3% organic independent case growth, driven by a 5.8% independent account growth [7] - Convenience segment net sales increased by 6.1%, benefiting from market share gains and onboarding of new accounts [13] - Specialty segment saw modest improvement in top-line trends, with sales growth in vending, office coffee, retail, campus, and travel channels [16] Market Data and Key Metrics Changes - Industry-wide foot traffic decelerated, with December traffic down 3.5% [9] - Convenience segment sales were driven by low single-digit dollar growth from food and mid-teen non-combustible nicotine product sales growth [14] - Total company cost inflation was approximately 4.5%, with food service inflation at 1.8% and convenience cost inflation at 7.4% [20] Company Strategy and Development Direction - The company is focused on a three-year strategic vision aimed at revenue growth, market share gains, gross margin enhancement, and improving operating leverage [6] - PFG is committed to pursuing strategic M&A opportunities, with a robust pipeline and a history of successful acquisitions [25] - The integration of Cheney Brothers is expected to contribute significantly to revenue and profit growth in the future, with synergies anticipated to flow through in years two and three post-acquisition [11][12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to drive growth and EBITDA performance despite a challenging macro environment [6] - The company anticipates a modest sequential decline in net interest expense and expects to maintain a tax rate close to historical averages [23][24] - Management remains optimistic about achieving the full-year guidance and the three-year projections announced at Investor Day [27] Other Important Information - The company generated $456 million of operating cash flow in the first half of 2026, an increase of $77 million compared to the same period last year [24] - PFG did not repurchase any shares under its share repurchase program in the quarter, prioritizing debt reduction instead [25] Q&A Session Summary Question: Can you provide additional color on performance by month for organic independent case growth? - Management noted strong performance in October, followed by a decline due to the government shutdown, with a rebound in January despite weather impacts [30][32] Question: How did the pace of your sales force growth compare to recent quarters? - The sales force growth remained consistent at around 6%, with a focus on market share performance [34] Question: Can you discuss the dynamics at play for the food service business in the second quarter? - Management highlighted strong independent growth but noted elevated operating expenses due to Cheney investments and deflation in cheese and poultry [38][40] Question: What is the outlook for the convenience segment's EBITDA margins? - Management expressed optimism about margin expansion due to growth in food service and non-combustible nicotine products [42][44] Question: How is the company managing procurement opportunities? - Management indicated confidence in achieving procurement synergies over the three-year plan, with progress expected in the back half of the year [47][49] Question: What is the impact of deflation on margins? - Deflation is expected to impact margins, particularly in cheese and poultry, which the company overindexes [50][91] Question: How does the company view the competitive environment? - Management noted consistent market share gains and did not observe significant changes in the competitive landscape [82]

Financial Performance - Net sales for Q2 FY2026 grew by 5.2% to $16.4 billion, driven by increased case sales and a favorable shift in the mix of cases sold[7] - Gross profit for Q2 FY2026 improved by 7.6% to $2.0 billion, attributed to procurement efficiencies and a favorable case mix[8] - Net income for Q2 FY2026 increased by 45.5% to $61.7 million, primarily due to higher gross profit[10] - Adjusted EBITDA for Q2 FY2026 rose by 6.7% to $451.2 million[11] - For the first six months of FY2026, net sales increased by 7.9% to $33.5 billion, supported by recent acquisitions and case volume growth[13] - Net income for the six months ended December 27, 2025, was $155.3 million, compared to $150.4 million for the same period in 2024, showing an increase of 3.3%[37] - Total net sales for the three months ended December 27, 2025, increased by $806.5 million, or 5.2%, to $16,444.7 million compared to $15,638.2 million for the same period in 2024[54] - Total net sales for the six months ended December 27, 2025, increased by $2,466.9 million, or 7.9%, to $33,520.6 million compared to $31,053.7 million for the same period in 2024[54] Cash Flow and Assets - Operating cash flow for the first six months of FY2026 was $456.0 million, an increase from $379.0 million in the prior year[18] - Free cash flow for the first six months of FY2026 was $263.7 million, compared to $175.1 million in the prior year[19] - Cash and restricted cash at the end of the period was $49.5 million, down from $86.7 million at the beginning of the period, representing a decrease of 42.8%[37] - The company’s net cash provided by operating activities for the six months ended December 27, 2025, was $456.0 million, compared to $379.0 million in the prior year[52] Segment Performance - Foodservice segment net sales rose by $424.1 million, or 5.1%, to $8,802.7 million for the three months ended December 27, 2025[54] - Convenience segment net sales grew by $363.5 million, or 6.1%, reaching $6,331.0 million for the three months ended December 27, 2025[54] - Specialty segment net sales for the three months ended December 27, 2025, increased by $18.1 million, or 1.5%, to $1,252.7 million compared to $1,234.6 million for the same period in 2024[54] - Total segments Adjusted EBITDA for the six months ended December 27, 2025, increased by $104.0 million, or 11.0%, to $1,053.4 million compared to $949.4 million for the same period in 2024[55] - Foodservice segment Adjusted EBITDA for the six months ended December 27, 2025, increased by $56.8 million, or 10.1%, to $616.5 million compared to $559.7 million for the same period in 2024[55] - Convenience segment Adjusted EBITDA for the six months ended December 27, 2025, increased by $30.1 million, or 14.2%, to $242.7 million compared to $212.6 million for the same period in 2024[55] Guidance and Expectations - The company expects Q3 FY2026 net sales to be in the range of $16.0 billion to $16.3 billion[26] - For the full FY2026, net sales guidance has been adjusted to a range of $67.25 billion to $68.25 billion[27] - The company expects to realize synergies from the Cheney Brothers Acquisition, although there are risks associated with integration and achieving anticipated results[32] Competition and Economic Factors - The company continues to face intense competition and economic factors that could impact consumer confidence and discretionary spending[32] Other Financial Metrics - Total assets as of December 27, 2025, were $18,182.8 million, up from $17,881.2 million as of June 28, 2025, indicating a growth of 1.7%[36] - Total liabilities increased to $13,534.2 million as of December 27, 2025, from $13,408.8 million as of June 28, 2025, reflecting a rise of 0.9%[36] - Interest expense increased to $104.5 million for the three months ended December 27, 2025, compared to $100.2 million in the same period last year, a rise of 4.3%[46] - The company reported a provision for losses on accounts receivables of $13.3 million for the six months ended December 27, 2025, compared to $11.9 million in the prior year, an increase of 11.8%[37] - Acquisition, integration, and reorganization expenses decreased by 82.3% to $9.1 million for the three months ended December 27, 2025, down from $51.3 million in the same period last year[46] - The company reported a 72.5% increase in the change in LIFO reserve for the six months ended December 27, 2025, amounting to $52.6 million compared to $30.5 million in the prior year[49] Earnings Per Share - Adjusted Diluted EPS remained stable at $0.98 for both the three months ended December 27, 2025, and December 28, 2024[46]