A global leader in selling, marketing and distributor of food products, Sysco Corporation (SYY) posted first quarter of 2013 adjusted earnings (excluding special items) of 58 cents, beating the Zacks Consensus Estimate of 50 cents by 16%. The adjusted earnings also exceeded the prior-year quarter earnings of 56 cents by 3.6%. The upswing in the results was driven by solid top-line growth, prudent expense management and moderating cost environment.
Quarter in Detail
Sysco's sales grew 4.7% on a year-over-year basis to $11.08 billion in the first quarter of 2013, driven by 2.9% volume growth (including acquisitions). Acquisitions contributed 0.5% to sales growth, while unfavorable currency translation decreased sales by 0.3%. First quarter sales slightly lagged the Zacks Consensus Estimate of $11.15 billion.
Gross profit increased 2.9% to $2.0 billion, driven by strong sales. Adjusted operating income increased 2.0% in the quarter to $562.9 million, despite higher operating expenses.
Other Financial Updates
Cash and cash equivalents were $548.4 million at the end of September 29, 2012 as compared to $688.9 million at the end of June 30, 2012. Long-term debt was flat at $2.8 billion in the quarter as compared with the prior quarter.
Sysco spent $156 million as capital expenditure in the first quarter of 2013 related to facility replacements and expansions, replacements to Sysco's fleet, and technology. The company spent $152 million in the prior quarter.
Currently, we have a Neutral recommendation on Sysco Corporation. The stock carries a Zacks #4 Rank (a short-term Sell rating).
We appreciate the company’s strategy of growth through acquisitions and its efforts to reduce cost and improve efficiency. However, we are concerned about rising costs due to fuel price hikes and other inputs which hurt margins.
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