Volatile stock to watch: Performance Food Group Co (NYSE: PFGC)

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Performance Food Group Co (NYSE: PFGC) stock rose 15.59% on June 23rd, 2020 after the company in its participation in the Jefferies Virtual Consumer Conference, who despite the COVID-19 uncertainty, remained confident in the attractiveness of the long-term fundamentals of the industry.

However, the stock lost over 7% on 24th June, 2020 (as of 12:22 pm GMT-4 ; Source: Google finance) as the company due to the COVID-19 crisis, had experienced a sales decline of approximately 50% in the last two weeks of March, however the trends have improved sequentially through mid-June. Food Away From Home industry has proven to be resilient through historical cycles & the company is also confident in the long-term growth potential of the industry. The company’s recovery in the long term is based on being a market leader with scale and extensive geographic coverage, have a customer-centric business model that will support sustainable growth, have successfully expanded into new customers and channels by diversifying its business, the company’s proprietary brands are a key competitive advantage and is a disciplined and proven acquirer with a track record of successful integration. Due to crisis, the company withdrew its guidance for fiscal 2020.

For fiscal 2020 the company expects the interest expense to be in a range of approximately $115 million to $120 million, an effective tax rate on operations to be of approximately 30% and capital expenditures to be in the range of $150 million and $180 million, with depreciation to be in a range of $160 million to $170 million and amortization to be in a range of $90 million and $100 million. For the third quarter of 2020, the company had reported 49.3% rise in the net sales to $7.0 billion compared to the prior year period. The increase in net sales was mainly on back of Eby-Brown and Reinhart and sales growth in Vistar, most notably in the corrections, retail, and hospitality channels. The acquisition of Eby-Brown contributed $1,212.1 million to net sales for the third quarter of fiscal 2020, that includes $256.9 million related to excise taxes, while the acquisition of Reinhart had contributed $1,355.1 million to net sales for the third quarter of fiscal 2020. The company had acquired Reinhart Foodservice in December 2019 and its integration is on track. The company had acquired Eby-Brown acquisition in April 2019 to strategically expand into the convenience channel. At the end of March 2020, the Company had a total cash balance of $585.5 million.

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