Equity Research

Industry Update — May 3, 2022

 
Food Service

Food Service: Stagation Protection Adds to Attractive Reopen

Narrative
Remain Bullish on the Sector as We Approach Summer Inection
 
Our Call Equity Analyst(s)

Food service remains an attractive investment despite the uncertain macroeconomic Edward Kelly, CFA
backdrop, in our view. The space continues to provide leverage to the COVID recovery Senior Equity Analyst | Wells Fargo Securities, LLC
with an inection to come, but we also believe it oers underappreciated protection in Edward.J.Kelly@wellsfargo.com | 212-214-5304
a stagation or recessionary environment. Case volumes and earnings have historically Anthony Bonadio, CFA
proven to be more resilient than one would think, stronger for longer food ination is Associate Equity Analyst | Wells Fargo Securities, LLC
Anthony.Bonadio@wellsfargo.com | 212-214-5072
actually good for this model, and a slowing economy would probably help to ease recent
labor challenges. In the end, we view the combination of continued leverage to the COVID Evan Ketterhagen
recovery plus the angle of relative defense as fairly compelling in this uncertain market. Associate Equity Analyst | Wells Fargo Securities, LLC
Evan.Ketterhagen@wellsfargo.com
We remain bullish on the space, with our rank order for the following Overweight-rated
names still PFGC ($50.33), USFD ($38.03), and then SYY ($85.14).
The Food Service Model Has Proven To Be Fairly Resilient: On the surface, food service
seems cyclical given its exposure to restaurants, but this historically hasn't really proven
to be the case. Our work suggests a deep "Great Recession" type scenario is needed to
cause more material weakness in food away from home sales, but even this was proven
to be manageable. In the 2008/09 nancial crisis, SYY's organic case volume declined
in the mid-single digits in the worst quarter, but the drop in EBITDA was more modest
given the variable cost structure of the business. In the 2001/02 recession, SYY's organic
case volume remained positive every quarter during the downturn. In terms of stock
performance, SYY outperformed the S&P 500 during both periods.
Stronger for Longer Ination a Positive: Food price ination shows no sign of abating
given the added pressure of the war in Ukraine. This is good news for food service, as
the model has proven to benet from ination given its contract arrangements and
overall pricing structure. USFD's recent Q1 pre-announcement highlights this dynamic.
Ination accelerated sharply to 17%, which helped drive a meaningful sequential step-up
in gross prot per case growth (now 12% above 2019) and an earnings beat. Sustained
food ination should drive further gains in gross prot/case. Higher fuel costs represent
another issue of concern, as diesel (4-5% of opex) is now up 65% YoY. Our recent
discussions with management continue to support our view that this is a manageable
issue given surcharges and hedging.
The Labor Backdrop Could Actually Improve with Slowing Economic Growth: Labor
has been problematic for the industry, as shortages and wage ination have pressured
earnings. Conditions are beginning to improve at the margin as there are now more
drivers employed in the U.S. than pre-COVID and domestic spot rates are beginning to
ease, but pressure remains. A slowing economic backdrop could bring some relief to driver
and warehouse labor ination (combined 40% of operating expense).
COVID Recovery Marching Ahead; Calendar Q2 a Possible Inection: The recovery in
food service continues to have runway, in our view. Volumes in many channels still trail
pre-pandemic levels, especially hospitality, healthcare, and business related demand. We
expect a continued improvement in the summer months, which, when combined with
the food ination tailwind and some easing of cost pressures, could result in fairly robust
calendar Q2 earnings.

All estimates/forecasts are as of 5/2/2022 unless otherwise stated. 5/3/2022 5:00:00EDT. Please see page 14 for rating denitions, important disclosures and required analyst certications. Wells
Fargo Securities, LLC does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the rm may have a conict of interest that could aect
the objectivity of the report and investors should consider this report as only a single factor in making their investment decision.
Industry Update Equity Research

Rank Order Unchanged: PFGC remains our top idea given its leading business
momentum, recovery runway, upside to consensus, and attractive valuation. We also
continue to like USFD given the stock's attractive risk/reward. SYY remains a good story
under new leadership, but the stock has the least upside of the three, in our view.

2 | Equity Research
Food Service: Stagation Protection Adds to Attractive Reopen Narrative Equity Research

Food Service Companies Less Cyclical Than Appreciated

We believe the big three food distributors are less cyclical than most would think at rst glance.
These companies operate across a variety of segments, including restaurants, healthcare, education,
government, and hospitality. These various segments help to diversify revenue streams and often
provide a level of protection to the downside. The Food Away From Home channel has been rather
resilient historically, even in signicant downturns. Sales at full-service restaurants declined by just
-2.4% in 2009 vs 2008, and Food Away From Home as a whole declined by only -0.4%. During the last
downturn, while SYY's implied case growth numbers turned negative, the fallout was not extreme. At
its worst, SYY's implied core volume growth declined by -6.4% (in 4Q'09). From 3Q'08 to 2Q'10, the
company averaged an implied core volume growth rate of -3.7%. During the dot com bubble, Food
Away From Home posted growth of 3.8% in 2001 and 4.5% in 2002. We think this further shows the
resiliency of the channel, and is likely a better comparison to a potential downturn in the near future.
Exhibit 1 - Food Away From Home Growth Historically Requires Deep Recession to Turn Negative

10.0%

8.0%

6.0%

4.0%

2.0%

0.0%

(2.0%)

(4.0%)
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

% Change in FAH % Change in FAFH GDP Growth

Source: USDA, BEA, Wells Fargo Securities, LLC

Equity Research | 3
Industry Update Equity Research

Exhibit 2 - The Great Recession Was a Troubled Consumer Period, but SYY Managed Relatively Well

30.0%

25.0%

20.0%

15.0%

10.0%

5.0%

0.0%

(5.0%)

(10.0%)
1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019

SYY YoY Case Volume Growth SYY EBITDA Growth

Source: Company Data, Wells Fargo Securities, LLC

SYY shares also have performed relatively well during the last two major recessions. During the
tech bubble, SYY outperformed the S&P 500 every month from January 2001 through December
2002 (when using month end prices). During the great recession, we think investors took more of
a shoot rst and ask questions later approach to SYY. The company underperformed the S&P 500
from early 2007 through mid-2008, but then gained support through the back half of the nancial
downturn when results were better than feared. From July 2008 through December 2009, shares of
SYY outperformed the S&P 500 by an average of 7.3% each month.
Exhibit 3 - SYY Outperformed the S&P 500 Throughout the Dot Exhibit 4 - SYY's Shares Followed A Shoot First Ask Questions
Com Recession Later Approach During the Great Recession
80.0% 25.0%
SYY's shares outperformed the S&P 500 20.0% SYY's shares meaningfully underperformed
70.0% throughout the 2001/2002 recession the S&P 500 at the beginning of the last
15.0% recession, but began to trade better in
60.0%
10.0% 2H'08 and 1H'09
50.0% 5.0%
40.0% 0.0%

30.0% -5.0%
-10.0%
20.0%
-15.0%
10.0% -20.0%
0.0% -25.0%
1/1/2000 7/1/2000 1/1/2001 7/1/2001 1/1/2002 7/1/2002 1/1/2007 7/1/2007 1/1/2008 7/1/2008 1/1/2009 7/1/2009

SYY's Relative Share Performance to the S&P 500 SYY's Relative Share Performance to the S&P 500

Source: FactSet, Wells Fargo Securities, LLC Source: FactSet, Wells Fargo Securities, LLC

Stronger for Longer Ination Backdrop a Positive for Food Service

The new year began with an expectation that food cost ination would moderate, but the war in
Ukraine has seemingly changed this view and fears of stagation have risen considerably. While there
is still a case to me made for some moderation from current levels, it does seem likely that ination
could still remain high through the year. Vendors have recently been highlighting the need for further
price increases despite signicant activity in Q1. Even if food PPI peaked at 15.6% in March 2022,
which seems unlikely since it actually accelerated 2% sequentially from February alone, ination would

4 | Equity Research
Food Service: Stagation Protection Adds to Attractive Reopen Narrative Equity Research

still be up 5% in December 2022. PPI has a strong correlation with the food cost ination numbers
reported by the large distributors.
Exhibit 5 - Food PPI Remains At Elevated Levels Exhibit 6 - 2 and 3 Year Food PPI Continued to Trend Higher in
260 18.0%
1Q'22
16.0% 18.0%
250 14.0% 16.0%
12.0%
240 14.0%
10.0%
8.0% 12.0%
230
6.0% 10.0%
4.0% 8.0%
220
2.0%
6.0%
210 0.0%
(2.0%) 4.0%
200 (4.0%) 2.0%
Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 Jun-21 Sep-21 Dec-21 Mar-22
0.0%
1Q'19 2Q'19 3Q'19 4Q'19 1Q'20 2Q'20 3Q'20 4Q'20 1Q'21 2Q'21 3Q'21 4Q'21 1Q'22
PPI: Finished Consumer Foods Index PPI: Finished Consumer Foods Y/Y (RHS)
PPI: Finished Consumer Foods Y/Y, 2 Yr Stack PPI: Finished Consumer Foods Y/Y, 3 Yr Stack
Source: BLS, Wells Fargo Securities, LLC
Source: BLS, Wells Fargo Securities, LLC
Exhibit 7 - PPI Strongly Correlated with Food Service Ination
16%
14%
12%
10%
8%
6%
4%
2%
0%
-2%
-4%
-6%
1Q05
3Q05
1Q06
3Q06
1Q07
3Q07
1Q08
3Q08
1Q09
3Q09
1Q10
3Q10
1Q11
3Q11
1Q12
3Q12
1Q13
3Q13
1Q14
3Q14
1Q15
3Q15
1Q16
3Q16
1Q17
3Q17
1Q18
3Q18
1Q19
3Q19
1Q20
3Q20
1Q21
3Q21
1Q22

U.S. Broadlines Inflation (SYY Reported) Food PPI (Finished Consumer Foods, Processed)

Source: BLS, Company data, Wells Fargo Securities, LLC

We have long argued that food cost ination is good for the food service model, and we expect
that trend to hold in 2022. Historically, ination yields growth in gross prot dollars/case given the
contract structure of larger customers. Pass through in the non-contract independent business has
also typically been orderly given these customers are sub-scale. This dynamic has certainly held true
during the COVID recovery; ll rate issues associated with shortages in inventory and logistics labor
has created an environment where service levels have been more important than price. We see no
reason for this to change materially given the high reopen demand we are likely to see throughout the
remainder of the year.
Exhibit 8 below, which displays SYY's gross prot per case vs ination, points to a positive historical
correlation. While there have been divergences in the past, we expect this relationship to hold true over
the coming quarters and support SYY's (as well as USFD's and PFGC's) gross prot per case growth. In
fact, USFD's pre-announcement of 1Q results backs up this point, with the company reporting cost of
food ination of 17% (up from 14.4% in 4Q'21) and "record levels" of adjusted gross prot per case.

Equity Research | 5
Industry Update Equity Research

Exhibit 8 - SYY's Gross Prot Per Case Growth Has Historically Followed Ination
20%

15%

10%

5%

0%

-5%

-10%
1Q05

1Q06

1Q07

1Q08

1Q09

1Q10

1Q11

1Q12

1Q13

1Q14

1Q15

1Q16

1Q17

1Q18

1Q19

1Q20

1Q21

1Q22
SYY U.S. Broadlines GP/Case Growth U.S. Broadlines Inflation (SYY Reported)

10%
Source: BLS, Company data, Wells Fargo Securities, LLC
While we expect all three of the food distributors to benet from this phenomenon over the coming
quarters, SYY's contract type has the most favorable breakdown, in our view. ~50% of its U.S. based
sales stem from contracts that use a percentage markup (based on our estimates), which generally has
a positive impact from ination on GP/case (see Exhibits 9 and 10 below). It also has another ~30% of
sales in the U.S. based on spot pricing, which typically is neutral to positive on GP/case.
Exhibit 9 - Percentage Markup Contracts Leveraged to Re-Ination

Contract Type: Inflation Dynamics

Fixed Fee/
Percentage Markup
Case

Original Inflation New Original Inflation New

Price $40.00 $3.00 $43.00 $40.00 $2.55 $42.55

COGS $34.00 $2.55 $36.55 $34.00 $2.55 $36.55

GP ($) $6.00 $0.45 $6.45 $6.00 $0.00 $6.00

GM (%) 15% 15% 15% 14%

Source: USFD, Company data, Wells Fargo Securities, LLC

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Food Service: Stagation Protection Adds to Attractive Reopen Narrative Equity Research

Exhibit 10 - Estimated Contract Overview for the Big Three

Contract Type: Big 3 Breakdown

Non-Contract/ Fixed Fee/

Percentage Markup
Spot Pricing Case

Priced at a percentage Priced at a fixed markup

Priced by sales rep at time markup to current COGS; per case or per pound;
Detail
of order typically canned, dry, and typically beef, poultry, and
frozen grocery seafood

Inflation Impact on
Neutral to Positive Positive Neutral
GP/Case
Inflation Impact on
Neutral to Negative Neutral Negative
GM

~30% of U.S. sales (~1/2 ~50% of U.S. sales (~1/2 ~20% of U.S. sales
of restaurant customers, of restaurant customers (SYGMA segment and a
SYY
which represent ~2/3 of and most non-restaurant small portion of chain
U.S. broadlines) customers in U.S.) restaurant customers)

~35% (a little more than ~30% (a little less than

~1/3 of total sales
USFD 1/2 of chain/contract 1/2 of chain/contract
(independent restaurants)
customers) customers)

>25% of total sales <25% of total sales (>2/3 >50% of total sales (chain
PFGC
(independent customers) of this is Vistar) customers)

Source: Company Data, Wells Fargo Securities, LLC

The Labor Backdrop Could Actually Improve with Slowing Economic Growth
Labor has been problematic for the industry, as shortages and wage ination have pressured earnings.
Exhibit 11 below shows just how much wage pressure has accelerated recently. The average hourly
wage for transportation and warehousing employees (an estimated 40% of food service Opex) grew
6.0% in C4Q'21 according to the Bureau of Labor Statistics, and accelerated to 7.5% in C1Q'22. Added
costs in over-time, temp workers, retention bonuses, training, and low productivity of new hires have
added to the labor cost pressures in recent quarters. For example, adj. opex/case for USFD was up
11.7% YoY and 15.2% versus 2019 in Q1'22. For reference, between 1Q'15 and 4Q'19, the largest YoY
increase in this metric for USFD was 3.6%, and we believe the annual rate of opex ination pre-COVID
was just under 2%.

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Industry Update Equity Research

Exhibit 11 - Transportation and Warehousing Average Hourly Wage Growth May be Peaking

$30 12.0%

10.0%

8.0%
$25
6.0%

4.0%
$20
2.0%

0.0%

$15 (2.0%)

Transportation & Warehousing Avg Wage 1 Yr Change (RHS)

2 Yr Change (RHS) Avg 1 Yr Change from 2010 - 2020 (RHS)

Source: BLS, Wells Fargo Securities, LLC

A weaker economic backdrop would clearly help ease the labor pressures experienced by the food
service players. There is already evidence of these pressures beginning to ease. The number of drivers
employed in trucking is actually back to 2019 levels. Spot prices on domestic freight have come down
considerably in recent months. We also have started to hear that driver pay increases have moderated.
Warehouse worker pressure remains, but the question is for how long. In the end, a macro slowdown
could help end the biggest cost pressure for distributors. At the very least, we think this can help
alleviate costs that are more one-o in nature like training, overtime, temp workers, and low initial
productivity levels of new hires.
Exhibit 12 - Food Manufacturing and Trucking Employment Levels Are Above Pre-COVID Levels
(000's)

1,800

Nov-19, 1662.4 Mar 21, 1674.2

1,600 June 19, 1540.2 Mar 21, 1550.8

1,400 Employment levels for food

manufacturing and trucking are back
above pre-COVID levels

1,200
1/1/2017 1/1/2018 1/1/2019 1/1/2020 1/1/2021 1/1/2022

Food Manufacturing Employment Trucking

Source: BLS, Wells Fargo Securities, LLC

8 | Equity Research
Food Service: Stagation Protection Adds to Attractive Reopen Narrative Equity Research

Exhibit 13 - Dry Van and Reefer Spot Prices Have Meaningfully Declined Recently

100.0%

80.0% Dry Van and Reefer spot rates (incl.

fuel) have recently declined sharply
60.0% on a YoY basis

40.0%

20.0%

0.0%

(20.0%)

(40.0%)
Apr-17 Apr-18 Apr-19 Apr-20 Apr-21 Apr-22

Dry Van Reefer

Source: TruckStop.com, Bloomberg, Wells Fargo Securities, LLC

COVID Recovery Marching Ahead; Calendar Q2 a Possible Inection

While the food service space is more defensive than investors appreciate, in our view, its also well
positioned to continue to capture the upside from one of the few positive investment themes in
consumer at the moment... the pandemic re-opening. Traditional restaurants (roughly half of sales for
a food service company) on the surface seem to have recovered nicely from COVID based on Census
data, but volumes likely still have upside on the return to oce theme. Hospitality case volume was
still down mid-teens to 2019 in Q1 according to USFD, but we expect accelerating summer travel to
drive a continued improvement in the coming months. Healthcare, another important channel, is still
running down high-single digits to 2019 according to USFD. Case volume should continue to improve
from here in our view.
We also see positive catalysts beyond an improvement in industry demand. As we have detailed in
this report, product cost ination is showing no sign of abating, which should be good for gross prot
dollars. USFD's gross prot/case accelerated to up 12% versus 2019 in Q1; some of this was internally
driven, but we also believe accelerating ination played a key role. We also see potential improvement
on the cost front, as the work force of each company continues to normalize and one-time costs
related to hiring, retention, and training ease.
In the end, we believe calendar Q2 could represent an inection quarter given these tailwinds align with
the largest quarter of the year for food service players.

Equity Research | 9
Industry Update Equity Research

Exhibit 14 - Organic Case Volumes Indexed to 2019 Vary By Distributor

100

95

90

85

80

75

70
C1Q'21 C2Q'21 C3Q'21 C4Q'21

PFGC SYY USFD

Source: Company Data, Wells Fargo Securities, LLC

Exhibit 15 - Restaurant Volume Is Only Slightly Ahead of 2019 Levels According to Census Data

30.0%
20.0%
10.0%
0.0%
(10.0%)
(20.0%)
(30.0%)
(40.0%)
(50.0%)
(60.0%)
Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 Jun-21 Sep-21 Dec-21 Mar-22

Restaurant Sales vs 2019

Restaurant Volume vs 2019 (Census Restaurant Sales Less FAFH CPI)

Source: BLS, Wells Fargo Securities, LLC

10 | Equity Research
Food Service: Stagation Protection Adds to Attractive Reopen Narrative Equity Research

Exhibit 16 - While TSA Passenger Throughput has Increased It Still Trails 2019 Numbers

80m 0.0%

70m (5.0%)

60m (10.0%)

50m (15.0%)

40m (20.0%)

30m (25.0%)
January February March April

2022 TSA Passengers 2019 TSA Passengers 2022 vs 2019 (RHS)

Source: TSA, Wells Fargo Securities, LLC

Exhibit 17 - Gross Prot Per Case Should Maintain Momentum In 2Q

20.0%

15.0%

10.0%

5.0%

0.0%

(5.0%)

(10.0%)
1Q'21 2Q'21 3Q'21 4Q'21 1Q'22

USFD Adj. Gross Profit/Case vs 2019 USFD Adj. Opex/Case vs 2019

Source: Company Data, Wells Fargo Securities, LLC

Equity Research | 11
Industry Update Equity Research

Exhibit 18 - SYY's Relative NTM P/E Is Exhibit 19 - USFD's Relative NTM P/E Is Exhibit 20 - PFGC's Relative NTM P/E Is
Nearly In-Line With Pre-Covid Average Lagging Pre-Covid Average Lagging Pre-Covid Average
160 140 160

140 120 140

120 100 120

100 80 100

80 60 80

60 40 60
May-16 May-17 May-18 May-19 May-20 May-21 Apr-16 Apr-17 Apr-18 Apr-19 Apr-20 Apr-21 Apr-16 Apr-17 Apr-18 Apr-19 Apr-20 Apr-21

SYY NTM P/E Relative to S&P 500 USFD NTM P/E Relative to S&P 500 PFGC NTM P/E Relative to S&P 500

Source: FactSet, Wells Fargo Securities, LLC Source: FactSet, Wells Fargo Securities, LLC Source: FactSet, Wells Fargo Securities, LLC

12 | Equity Research
Food Service: Stagation Protection Adds to Attractive Reopen Narrative Equity Research

Investment Thesis, Valuation and Risks

Performance Food Group Company (PFGC)
Investment Thesis
PFGC has a dierentiated position within the attractive food service industry, as it has the scale to capture share from smaller players and
compete eectively with its larger peers, yet its regional presence provides huge runway for growth. Its focus on growing high-margin
independent and private-label cases in food service, new channel expansion in its dierentiated Vistar business, select new customer
wins in Customized, and strong cost control should yield strong organic EBITDA growth, in our view. Supplementing this outlook could
potentially be a compelling M&A opportunity, in our view. We remain Overweight.
Target Price Valuation for PFGC: $66.00
Our $66 price target reects 23x CY 2022E EPS.
Risks to Our Price Target and Rating for PFGC
(1) COVID-related risk—a high level of near-term uncertainty remains, including regarding the independent customer outlook and mix
fallout; (2) Industry pricing risk—our positive outlook on PFGC and the industry assumes a continuation of the rational pricing backdrop
that has prevailed over the past few years; (3) Ination volatility—we assume a return to steady ination, which should be positive for
the distribution model, but visibility is admittedly low; (4) Execution risk—PFGC's management team is well regarded, in our view, but is
juggling numerous initiatives; (5) Amazon headline risk—concerns about Amazon entering food service would likely pressure the group
(regardless of the actual risk).
 
SYSCO Corporation (SYY)
Investment Thesis
Our condence in SYY's ability to navigate the COVID-19 disruption and emerge even stronger is growing. New CEO Kevin Hourican looks
like the “Real Deal”. Industry fundamentals are bottoming and look poised to improve from here. The market may be too negative on the
independent fall-out. Lastly, SYY is best positioned to take advantage of what could be massive competitor disruption, in our view. We
remain Overweight.
Target Price Valuation for SYY: $95.00
Our $95 price target reects 23x CY 2022E EPS.
Risks to Our Price Target and Rating for SYY
Risks include (1) COVID-related risk – a high level of near-term uncertainty remains, including regarding the independent customer outlook
and mix fall-out; (2) Execution risk – recently appointed CEO Kevin Hourican must juggle continued share gains in the U.S., pressure in
Europe, expense management, and integrating acquisitions; (3) Industry pricing risk – Our positive outlook on SYY and the food service
industry assumes a continuation of the rational pricing backdrop that has prevailed over the last few years; (4) Ination volatility – we
assume a return to steady ination, which should be positive for the distribution model, but visibility is low given volatility in commodities;
(5) Amazon headline risk - new concerns about Amazon entering food service would likely pressure the group (regardless of the actual risk).
 
US Foods Holding Corp. (USFD)
Investment Thesis
USFD, which is the No. 2 player in the consolidating food service industry, represents an attractive investment option, in our view. The
company has hit the ground running since its May 2016 IPO, generating strong earnings growth and ramping up M&A, while making
progress on deleveraging the balance sheet. USFD has also executed well through the pandemic and expects post-COVID margins to be
higher. Though the near-term could be dicult, we remain constructive on the recovery outlook with vaccine distribution accelerating and
life poised to normalize starting sometime this summer. We remain Overweight.
Target Price Valuation for USFD: $50.00
Our $50 price target reects 22x CY 2022E EPS, a discount to industry-leader SYY but appropriate for a name with positive reopening
leverage and a path to improved fundamentals.
Risks to Our Price Target and Rating for USFD
Risks include (1) COVID-related risk - a high level of near-term uncertainty remains, including regarding the independent customer outlook
and mix fall-out; (2) Execution risk – USFD's ability to achieve its growth targets relies on continued share gains with its dierentiated
strategy, achieving operating cost savings, and successfully integrating M&A; (3) Industry pricing risk – we assume the pricing backdrop in
the industry remains rational; (4) Ination volatility – we assume a return to steady ination, which should be positive news for the food
distribution model, but visibility is low; (5) Amazon headline risk – new concerns about Amazon entering food service would likely pressure
the group (regardless of the actual risk).
 

Equity Research | 13
Industry Update Equity Research

Required Disclosures
I, Edward Kelly, certify that:
1) All views expressed in this research report accurately reect my personal views about any and all of the subject securities or issuers discussed; and

2) No part of my compensation was, is, or will be, directly or indirectly, related to the specic recommendations or views expressed by me in this research report.

Wells Fargo Securities, LLC does not compensate its research analysts based on specic investment banking transactions. Wells Fargo Securities, LLC’s research
analysts receive compensation that is based upon and impacted by the overall protability and revenue of the rm, which includes, but is not limited to investment
banking revenue.

Additional Information Available Upon Request

Performance Food Group Company Rating History as of 04-29-2022

powered by: BlueMatrix
BUY:$50.00 BUY:$53.00 BUY:$59.00 BUY:$40.00 BUY:$36.00 BUY:$40.00 BUY:$45.00 BUY:$56.00 BUY:$62.00 BUY:$66.00
07/30/2019 09/27/2019 12/23/2019 03/16/2020 04/16/2020 08/12/2020 09/17/2020 11/24/2020 01/27/2021 04/27/2021
70

60

50

40

30

20

10
Jul 19 Oct 19 Jan 20 Apr 20 Jul 20 Oct 20 Jan 21 Apr 21 Jul 21 Oct 21 Jan 22 Apr 22

Closing Price Price Target

Initiation (I); Drop Coverage (D); Overweight (BUY); Equal Weight (HOLD); Underweight (SELL); Suspended (SR); Not Rated (NR); No Estimate (NE)

SYSCO Corporation Rating History as of 04-29-2022

powered by: BlueMatrix
BUY:$83.00 BUY:$88.00 BUY:$90.00 HOLD:$75.00 HOLD:$50.00 BUY:$70.00 BUY:$75.00 BUY:$80.00 BUY:$89.00 BUY:$95.00
05/06/2019 09/27/2019 11/04/2019 02/04/2020 03/16/2020 06/05/2020 09/16/2020 11/24/2020 01/27/2021 04/27/2021
100

90

80

70

60

50

40

30
Jul 19 Oct 19 Jan 20 Apr 20 Jul 20 Oct 20 Jan 21 Apr 21 Jul 21 Oct 21 Jan 22 Apr 22

Closing Price Price Target

Initiation (I); Drop Coverage (D); Overweight (BUY); Equal Weight (HOLD); Underweight (SELL); Suspended (SR); Not Rated (NR); No Estimate (NE)

14 | Equity Research
Food Service: Stagation Protection Adds to Attractive Reopen Narrative Equity Research

US Foods Holding Corp. Rating History as of 04-29-2022

powered by: BlueMatrix
BUY:$45.00 BUY:$54.00 BUY:$30.00 BUY:$47.00 BUY:$50.00
05/07/2019 08/16/2019 03/16/2020 11/24/2020 01/27/2021
60

50

40

30

20

10

0
Jul 19 Oct 19 Jan 20 Apr 20 Jul 20 Oct 20 Jan 21 Apr 21 Jul 21 Oct 21 Jan 22 Apr 22

Closing Price Price Target

Initiation (I); Drop Coverage (D); Overweight (BUY); Equal Weight (HOLD); Underweight (SELL); Suspended (SR); Not Rated (NR); No Estimate (NE)

Wells Fargo Securities, LLC, or its aliates intends to seek or expects to receive compensation for investment banking services in the next three months from an
aliate of Performance Food Group Company.

Wells Fargo Securities, LLC, or its aliates managed or co managed a public oering of securities for an aliate of Performance Food Group Company within the
past 12 months.

Wells Fargo Securities, LLC, maintains a market in the common stock of Performance Food Group Company.

Wells Fargo Securities, LLC, or any of its aliates, intends to seek or expects to receive compensation for investment banking services from Performance Food
Group Company in the next three months.

Wells Fargo Securities, LLC, or its aliates has a signicant nancial interest in Performance Food Group Company.

Wells Fargo Securities, LLC, or its aliates received compensation for investment banking services from an aliate of Performance Food Group Company in the
past 12 months.

Wells Fargo Securities, LLC and/or its aliates, have benecial ownership of 0.5% or more of any class of the common stock of SYSCO Corporation.

Wells Fargo Securities, LLC, or its aliates received compensation for investment banking services from SYSCO Corporation in the past 12 months.

Wells Fargo Securities, LLC, or its aliates intends to seek or expects to receive compensation for investment banking services in the next three months from an
aliate of SYSCO Corporation.
Wells Fargo Securities, LLC, maintains a market in the common stock of SYSCO Corporation.

SYSCO Corporation currently is, or during the 12-month period preceding the date of distribution of the research report was, a client of Wells Fargo Securities, LLC.
Wells Fargo Securities, LLC, provided non-investment banking securities-related services to SYSCO Corporation.

Wells Fargo Securities, LLC and/or its aliates, have benecial ownership of 1% or more of any class of the common stock of SYSCO Corporation.

Wells Fargo Securities, LLC, or its aliates, managed or co-managed a public oering of securities for SYSCO Corporation within the past 12 months.

Wells Fargo Securities, LLC, or any of its aliates, intends to seek or expects to receive compensation for investment banking services from SYSCO Corporation in
the next three months.

Wells Fargo Securities, LLC, received compensation for products or services other than investment banking services from SYSCO Corporation in the past 12
months.

SYSCO Corporation currently is, or during the 12 month period preceding the date of distribution of the research report was, a client of Wells Fargo Securities, LLC.
Wells Fargo Securities, LLC, provided investment banking services to SYSCO Corporation.

Wells Fargo Securities, LLC, or its aliates has a signicant nancial interest in SYSCO Corporation.

Wells Fargo Securities, LLC, or its aliates intends to seek or expects to receive compensation for investment banking services in the next three months from an
aliate of US Foods Holding Corp..

Wells Fargo Securities, LLC, or its aliates managed or co managed a public oering of securities for an aliate of US Foods Holding Corp. within the past 12
months.

Equity Research | 15
Industry Update Equity Research

Wells Fargo Securities, LLC, maintains a market in the common stock of US Foods Holding Corp..
Wells Fargo Securities, LLC, or any of its aliates, intends to seek or expects to receive compensation for investment banking services from US Foods Holding Corp.
in the next three months.

Wells Fargo Securities, LLC, or its aliates received compensation for investment banking services from an aliate of US Foods Holding Corp. in the past 12
months.
STOCK RATING

1=Overweight: Total return on stock expected to be 10%+ over the next 12 months. BUY

2=Equal Weight: Total return on stock expected to be -10% to +10% over the next 12 months. HOLD

3=Underweight: Total return on stock expected to lag the Overweight- and Equal Weight-rated stocks within the analyst's coverage universe over the next 12
months. SELL

As of May 2, 2022
55.9% of companies covered by Wells Fargo Securities, LLC Equity Research are rated Overweight.
37.1% of companies covered by Wells Fargo Securities, LLC Equity Research are rated Equal Weight.
7.0% of companies covered by Wells Fargo Securities, LLC Equity Research are rated Underweight.
Wells Fargo Securities, LLC has provided investment banking services for 48.7% of its Equity Research Overweight-rated companies.
Wells Fargo Securities, LLC has provided investment banking services for 43.4% of its Equity Research Equal Weight-rated companies.
Wells Fargo Securities, LLC has provided investment banking services for 32.8% of its Equity Research Underweight-rated companies.

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16 | Equity Research
Food Service: Stagation Protection Adds to Attractive Reopen Narrative Equity Research

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Equity Research | 17