02:40 PM EDT, 04/05/2024 (MT Newswires) -- The recent share-price pullback of food distribution companies presents a buying opportunity as their relatively defensive business models and normalizing inflation should help offset any top-line weakness, Deutsche Bank said in a note emailed Friday.

Frozen potato food processor Lamb Weston ( LW ) on Thursday reported softer-than-expected quarterly results and flagged weak retail traffic trends that sent its stock plunging 19%. Shares of US Foods ( USFD ) , Performance Food ( PFGC ) and Sysco ( SYY ) closed down that day.

"Another negative data point (Lamb Weston ( LW ) seeing softening restaurant traffic) adds to already negative sentiment on the restaurant space as trends remain weak," Deutsche Bank analyst Lauren Silberman said.

However, the brokerage views the magnitude of the Lamb Weston ( LW ) move as "overblown," citing the company's different customer mixes, levers to drive growth, and fulfillment disruptions stemming from a transition to a new enterprise resource planning system. Chief Executive Tom Werner said in a statement on Thursday that the ERP disruption has largely been resolved.

Lamb Weston ( LW ) reported a 12% decline in North America sales due largely to the software transition that Werner said pressured third-quarter sales volume and margin performance. The company reduced its full-year sales and non-GAAP earnings per share guidance to reflect the ERP transition and unfavorable near-term restaurant traffic trends.

While food distributors face some traffic and sales risks, they have "relatively defensive business models, and normalized inflation and productivity gains should help mitigate potential top-line weakness," Silberman said.

Deutsche Bank maintained its broad positive view on the industry and encouraged investors to buy sector shares on the pullbacks, particularly ahead of Sysco ( SYY ) and US Foods' ( USFD ) respective investor days in May and June that it said could serve as catalysts.

Price: 80.23, Change: -1.30, Percent Change: -1.59