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Deutsche Bank downgraded Performance Food (PFGC
) to sell from hold.
Analyst Edouard Aubin says recent data indicates the refrigerated salad category's momentum at retail has continued to decelerate over the past six months, and that actual volumes were down 6% in both July and August, vs. -3% in June and +2% in May. Also, within the category, Fresh Express has lost some market share.
Although Fresh Express continues to add capacity with two new lines added over the past few months, he says higher fixed costs and a slowdown in the top line doesn't bode well for margins. As a result, he now expects Performance Food to report $1.29 2004 earnings per share, vs. management's guidance of $1.30 to $1.40. He cut the target price to $19.50.