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Sysco's (SYY) Q4 Earnings Meets Expectations, Sales Up Y/Y

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Sysco's (SYY) Q4 Earnings Meets Expectations, Sales Up Y/Y

Sysco's (SYY) Q4 results depict consistent gains from the U.S Foodservice and International businesses. The company successfully completes three-year financial plan.

Sysco Corporation SYY reported fourth-quarter fiscal 2018 results, with the top and the bottom lines improving year over year. Earnings were in line with the Zacks Consensus Estimate.  The company continued to witness growth in U.S Foodservice operations, buoyed by growth in local and total case volumes as well as favorable results in the international segment. With the fourth-quarter results, the company also marked the successful completion of its three-year financial plan. Robust performance in the quarter raised investors’ optimism, as the stock rallied close to 2.9% during the pre-market trading session on Aug 13.   

Quarter in Detail

Adjusted earnings of 94 cents per share jumped 30.6% year over year and were in line with the Zacks Consensus Estimate. The results broke the company’s four-quarter long trend of earnings beat. On a GAAP basis, earnings surged 50.1% to 85 cents.
 
This global food products maker and distributor’s sales of $15,316 million advanced 6.2% year over year. However, the figure fell short of the Zacks Consensus Estimate of $15,450 million.

Gross profit improved 5.7% to $2,916.7 million in the quarter, courtesy of higher sales. However, gross margin fell 9 basis points (bps) to 19%. Further, adjusted operating income rose 15.7% to $771.2 million, while adjusted operating margin improved 41 bps to 5%.

Price, Consensus and EPS Surprise

Price, Consensus and EPS Surprise | Quote

Segment Details

U.S. Foodservice Operations

Segment sales advanced 6.1% to $10,407.6 million, where local case volume within U.S. Broadline operations climbed 5% (including organic sales growth of 3%) and total case volume ascended 5.3% (wherein organic sales increased 3.5%). Gross profit expanded 5.2% to $2,086.8 million, while gross margin contracted 18 bps to 20.05%. The downside was caused by food cost inflation in U.S. Broadline, particularly in dairy, frozen potatoes and vegetables as well as in paper and disposables. Further, adjusted operating income climbed 7.1% to $869.3 million.

International Foodservice Operations

Segment sales increased 7.9% to roughly $2,947 million. Foreign exchange benefited segment sales by almost 1% during the period. Gross profit jumped 9.3% to $639 million, whereas the gross margin rose 28 bps to 21.68%. Also, adjusted operating income rose 10% to $101.5 million.

SYGMA

Sales in this segment improved 3.6% to $1,677.5 million. Gross profit rose 10.2% to $135.8 million and gross margin increased 48 bps to 8.10%. Operating income increased 47.5% to $11.6 million.

Other Updates

Sysco ended the quarter with cash and cash equivalents of $552.3 million, long-term debt of $7,540.8 million and total shareholders’ equity of $2,507 million.

During fiscal 2018, the company generated cash flow from operations of $2,158.6 million and incurred net capital expenditure of $666 million.

Additionally, this Zacks Rank #3 (Hold) is pleased with its fiscal 2018 performance, which marks the successful completion of its three-year plan that was initiated in fiscal 2015. During this three-year period, the company achieved local case growth of 3%. Also, the company attained adjusted gross profit CAGR of 4.2% and adjusted operating income CAGR of 11.1%.

Price Performance

Shares of Sysco have gained 16% in the past three months compared with the industry’s rise of 4.8%

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