Sysco believes in growing through acquisitions since the company operates in a highly fragmented industry. It intends to achieve sales growth of 0.5% to 1% through acquisitions in the long term. The acquisition environment is currently favorable and the company has a number of acquisitions at various stages of processing at the moment. To date in fiscal year 2013, the company has already acquired a total of 9 companies, whose aggregate annual revenues is over $750 million.
We appreciate the company’s strategy of growth through acquisitions and its efforts to reduce costs and improve efficiency. However, we are concerned about rising costs due to fuel price hikes and other inputs, which hurt margins.
Sysco holds a Zacks Rank #4 (Sell). However, there are other stocks in the retail and wholesale sector that are worth considering. These include Green Mountain Coffee Roasters Inc (GMCR - Analyst Report), Nash Finch Co (NAFC - Analyst Report) and United Natural Foods Inc (UNFI - Analyst Report). While Green Mountain and Nash Finch carry a Zacks Rank #1 (Strong Buy), United Natural holds a Zacks Rank #2 (Buy).