Sysco Corporation SYY appears to be firmly placed as we enter 2021. The company, whose foodservice business has been suffering due to coronavirus-led woes, has been focused on supporting its customers amid the pandemic. The company is also utilizing its sales team to boost additional businesses and prepare for the return of demand in the food-away-from-home channel. Apart from this, Sysco’s transformation initiatives have been yielding results.
Courtesy of the abovementioned upsides, this Zacks Rank #2 (Buy) stock has gained 18.4% in the past three months compared with the industry’s rise of 8.6%. Let’s delve deeper into the factors, which are likely to keep the stock going.
Efficient Business Management Amid Pandemic
Sysco is making robust efforts to manage its business amid the pandemic. To this end, the company has been committed to helping its customers amid the crisis. Incidentally, the company is delivering holiday toolkits for restaurant tours, coming up with marketplace pop-up shops, offering solutions and prolonging the outdoor-dining season. Moreover, Sysco’s culinary experts are assisting restaurants in optimizing their menus to boost profitability and modify offerings for takeout and delivery efficiency. Apart from this, the company has hosted many webinars with customers.
As a significant chunk of the business has been hurt by reduced away-from-home sales amid the coronavirus crisis, the company has turned its distribution model to areas it didn’t essentially cater to before the pandemic. These include grocers, retailers and supply-chain contracts. The company is also supporting healthcare customers by arranging for deliveries of important items like PPE to hospitals, urgent care facilities and long-term care facilities. Apart from this, the company’s digital investments, like its Shop platform, bode well. In the first quarter of fiscal 2021, Sysco’s sales steadily improved week over week in the beginning, while the enhancements leveled out as the quarter ended. Sysco witnessed better-than-expected results from local customers in the quarter, especially independent customers. Also, restaurants saw a better-than-anticipated performance. Further, healthcare performed well throughout the quarter. Management earlier projected fiscal 2021 sales to be stronger than the fiscal 2020 level despite the current scenario.
Transformation Efforts Underway
Additionally, Sysco has been focused on its transformation initiatives. To this end, the company has been committed to becoming more digitally oriented, as part of which it is making investments to enhance its Sysco Shop digital order platform, among other efforts. By first-quarter-end, the proportion of orders placed via Sysco Shop expanded to nearly 60%. Further, Sysco is concentrating on improving its sales model – including transforming sales structure to be more focused, coordinating sales force incentives more closely with the company’s business goals and enhancing partnership of sales teams across its different business lines.
Moving on, Sysco is on track to regionalize its U.S. operations, which is likely to enhance the company’s efficiency. The company’s fourth initiative involves removing structural fixed costs. The company intends to eliminate annualized permanent fixed costs of about $350 million from its business in fiscal 2021. Apart from these savings, management had earlier outlined other cost-reduction opportunities, which are expected to deliver savings fiscal 2022 onward.
Sysco’s continued focus on providing value to its local customers through innovative product offerings, value-added services and improved e-commerce capabilities has enabled growth consistently. We believe that these factors along with the company’s robust efforts to manage the business well even amid such tough times are likely to keep it going.
3 Other Stocks to Satisfy Your Palate
Medifast MED, which currently carries a Zacks Rank #2, has a trailing four-quarter earnings surprise of 20.2%, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
B&G Foods BGS has a Zacks Rank of 2 and a trailing four-quarter earnings surprise of 9.3%, on average.
Hain Celestial HAIN has a Zacks Rank #2 and a trailing four-quarter earnings surprise of 24.6%, on average.
Just Released: Zacks’ 7 Best Stocks for Today
Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.4% per year.
These 7 were selected because of their superior potential for immediate breakout.
See these time-sensitive tickers now >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
The Hain Celestial Group, Inc. (HAIN) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research