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Here's How Sysco (SYY) Appears Just Ahead of Q4 Earnings

Zacks Equity Research
·4 mins read

Sysco Corporation SYY is likely to report a decline in the top and bottom lines when it releases fourth-quarter fiscal 2020 numbers on Aug 11. The Zacks Consensus Estimate for revenues is pegged at almost $8,188 million, indicating a slump of 47.1% from the prior-year quarter’s reported figure.

The Zacks Consensus Estimate for the bottom line stands at a loss of 39 cents against earnings of $1.10 reported in the year-ago period. Notably, the consensus mark has remained stable in the past 30 days. In the last reported quarter, Sysco delivered a negative earnings surprise of 15.1%. Further, this provider of food and related products to the foodservice industry has a trailing four-quarter negative earnings surprise of 2.5%, on average.

Sysco Corporation Price and EPS Surprise

Sysco Corporation Price and EPS Surprise
Sysco Corporation Price and EPS Surprise

Sysco Corporation price-eps-surprise | Sysco Corporation Quote

Key Factors to Note

Sysco serves a wide spectrum of the foodservice space, with about half of the consumption coming from the away-from-home channel in the United States. However, lower volumes in the food-away-from-home channel have been a deterrent for the company amid the pandemic. Incidentally, increased social distancing has had a considerable adverse impact on the company’s restaurant, education and hospitality customer segments.

As a significant chunk of the business has been hurt by reduced away-from-home sales amid the coronavirus crisis, the company in its last earnings call said that it has turned its distribution model to areas it didn’t essentially cater to before the pandemic. These include grocers, retailers and supply-chain contracts. Incidentally, the company is working with some of the best retailers to address customers’ needs through supply-chain as well as labor service deals. To this end, Sysco is offering supply-chain service deals like carrier services, cross-docking and freight brokerage, thanks to a solid transportation fleet and logistic capacity. Sysco has been shifting sales to national and regional retailers, who will cater to the growing demand at retail stores. Apart from this, the company’s digital investments, like the Shop platform, bode well.

Though Sysco is undertaking solid efforts to aid revenues through other channels, volume declines in the food-away-from-home space are not likely to be offset. In its third-quarter earnings call, management notified that it expects sales volume declines in the fourth quarter of fiscal 2020 to be greater than the planned cost reductions. We believe that this is likely to keep the bottom line under pressure. Apart from this, food cost inflation and adjusted higher operating expenses have been hurdles for the company for quite some time now. Moreover, the company remains exposed to volatile foreign currency movements.

What the Zacks Model Unveils

Our proven model doesn’t conclusively predict an earnings beat for Sysco this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Sysco currently has a Zacks Rank #5 (Strong Sell) and an Earnings ESP of 0.00%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks With Favorable Combinations

Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this season.

Ollies Bargain OLLI has an Earnings ESP of +8.86% and a Zacks Rank #1.

Dollar Tree DLTR has an Earnings ESP of +2.50% and a Zacks Rank #2.

Dollar General DG has an Earnings ESP of +2.90% and a Zacks Rank #2.

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