US Foods (NYSE: USFD) stock price popped more than 4% to $19.30 in pre-market trading on Friday after US private equity giant KKR (NYSE: KKR) reported $500m convertible preferred stock investment in the food distributor.
US Foods Holding is a foodservice distributor to over 300,000 restaurants and foodservice operators, with almost 70 locations and 76 cash and carry stores.
The New York-based investment business said it has a 9.5% stake in the business, adding it intends to engage in discussions with the company about its business, operations, strategy, plans and prospects.
The investments from KKR will boost the US Foods balance sheet during the current environment because its customers have been hit harder by the pandemic.
The shares of the food distributor have been hit hard by the pandemic as many of its restaurant customers have been disrupted by lockdowns, with most of them relying on their online services if they have them.
Its stock trading price has been on the recovery mode since bottoming around $8 on 12 March. Despite the recent gains, US Foods Holdings stock is still down almost by half this year.
Guggenheim analyst John Heinbockel says the food distributor would only be able to get back to 2019 sales and profits by 2023.
While BMO Capital said sluggish demand for food delivery to restaurants made it hard to recommend the sector with the broker warning that the US Foods stock is unlikely to perform well in the next two years. The firm has provided a market perform ratings and a $20 price target.
Last month the Pentagon recently announced a $478m contract with US Foods for food distribution to the Defense Logistics Agency, servicing the Air Force, Army, Marine Corps, Coast Guard, and federal civilian agencies