JP Morgan cuts Performance Food Group (PFGC) to underweight from overweight.
Analyst Stephen Chick says the investigation surrounds certain accounting practices at one of its Broadline units. He notes the company indicates earnings guidance is still on track, which coupled with aforementioned information, hopefully means issues are isolated and that amounts involved are inmaterial.
However, he says it is difficult to take management at face value, while credibility has been questioned before. Also, an informal SEC inquiry could turn formal.
He says the valuation doesn't look supportive, given inherent risks. Therefore, he downgrades the stock until the dust settles.