Performance Food Group (PFGC) reported an unexpectedly weak quarter and cut its outlook amid higher integration costs from its Cheney Bros acquisition and deflation in key commodities such as cheese and poultry, Morgan Stanley said in a report Wednesday.

The food distributor posted a modest revenue miss as "total case growth" softened, though organic independent case growth remained healthy at 5.3%, down about 100 basis points from the prior quarter, Morgan Stanley said.

The company reduced its full-year revenue guidance by $250 million to a range of $67.25 billion to $68.25 billion. This has been attributed to "deflationary moves" in cheese and poultry, which caused "inventory losses," and startup expenses linked to the 2024 purchase of Cheney Bros, the report said.

The investment bank said the "reset" may be temporary, noting that while the adjusted EBITDA miss, which came in at $451.2 million against analyst expectations of roughly $466 million, was unusual for the company, the underlying momentum in its convenience and independent segments remains strong.

Morgan Stanley has an overweight rating on Performance Food Group and lowered its price target to $120 from $123.

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