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Sysco (SYY) Looks Promising: Stock Up More Than 10% in 6 Months

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Sysco Corporation SYY appears to be in great shape, with strong growth potential. The company has been benefiting from its focus on the Recipe for Growth plan and solid food-away-from-home trends. Gains from these factors were visible in the company’s recently reported third-quarter fiscal 2022 results, wherein the top and bottom lines rose year over year and beat the Zacks Consensus Estimate. On its earnings call, management remained optimistic about its business and raised its bottom-line view for fiscal 2022.

The consensus mark for fiscal 2022 has gone up from $3.04 to $3.21 in the past seven days. Shares of this Zacks Rank #1 (Strong Buy) company have rallied 14.1% in the past six months compared with the industry’s rise of 9.4%. Let’s delve deeper into the upsides surrounding this marketer and distributor of food and related products.

Sysco Corporation Price, Consensus and EPS Surprise

Sysco Corporation Price, Consensus and EPS Surprise
Sysco Corporation Price, Consensus and EPS Surprise

Sysco Corporation price-consensus-eps-surprise-chart | Sysco Corporation Quote

Factors Working Well for Sysco

Sysco’s Recipe for Growth program involves five strategic priorities aimed at enabling the company to grow 1.5 times faster than the market by the FY24-end. The five strategic pillars include enhancing customers’ experiences via digital tools. In this regard, the company’s Sysco Shop platform and the new pricing software are working well. Further, SYY is focused on improving the supply chain to cater to customers efficiently and consistently with better delivery and omnichannel inventory management. Next, Sysco aims at providing customer-oriented merchandising and marketing solutions to augment sales. The company also targets having team-based selling, with an emphasis on important cuisines. Finally, Sysco is focused on cultivating new capacities, channels and segments alongside sponsoring investments via cost-saving initiatives. Sysco is progressing well with its Recipe for Growth and earlier unveiled plans to generate cost curtailments of $750 million for the period of FY21 to FY24.

The company has been carrying out various acquisitions over the years to grow its distribution network and customer base and boost long-term growth. In February 2022, the company concluded the acquisition of The Coastal Companies, which will operate under Sysco’s specialty produce business – FreshPoint. Before this, Sysco acquired Greco and Sons in the first quarter of fiscal 2022. We note that these acquisitions go in tandem with SYY’s Recipe for Growth.

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A Look at Q3 & Ahead

Sysco posted strong third-quarter fiscal 2022 results. It witnessed the strong consumer and customer away-from-home demand in late February and March as it snapped back from the Omicron impact. Further, the company continued to witness robust market share gains in the United States and internationally, reflecting strength in its Recipe for Growth plan. Sysco witnessed considerable volume gains. It also delivered an increased gross profit per case due to its efforts to counter product and fuel inflation. The company made solid improvements in operating expense leverage, including significantly lower snapback expenses. Sysco is also on track to improve the efficiency of its supply chain.

Robust sales and continued progress in enhancing operating expenses led to strong profit growth. The company’s adjusted earnings of 71 cents per share crushed the Zacks Consensus Estimate of 54 cents. The bottom line increased considerably from the year-ago period’s earnings of 22 cents per share. Sales of $16,902.1 million soared 42.9% year over year and beat the Zacks Consensus Estimate of $16,065 million. The robust third-quarter performance reflected solid demand and strong progress in the company’s transformation efforts. Sysco generated profitability despite the double-digit inflation and focused snapback and transformation investments.

Sysco made solid progress in the third quarter and expects to see further growth in the fourth quarter. It expects fourth-quarter earnings per share (EPS) in the range of $1.05-$1.15 compared with the 71 cents delivered in the fourth quarter of fiscal 2021. Management’s optimism for the fourth quarter is based on the expectations of a continued market revival, market share gains, the efficient pass-through of higher costs and improved operating expenses (stemming from reduced snapback and productivity-related costs). However, the fourth quarter of fiscal 2021 included an extra week, which is likely to affect comparisons. However, management remains optimistic about its business and raised its adjusted EPS guidance for fiscal 2022. Sysco now expects an EPS of the $3.16-$3.26 band, up from the previous view of the $3-$3.10 band.

All said, Sysco is likely to continue with its impressive growth story.

Other Consumer Staple Bets Worth Noting

Some other top-ranked stocks are McCormick & Company MKC, Celsius Holdings CELH and Medifast MED.

McCormick, the manufacturer, marketer and distributor of spices, seasoning mixes and condiments, currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for McCormick’s current financial-year sales and EPS suggests growth of nearly 5% and 3.9%, respectively, from the year-ago reported figure. MKC has a trailing four-quarter earnings surprise of around 7.3%, on average.

Celsius Holdings, which develops, processes, markets, distributes and sells functional drinks and liquid supplements, carries a Zacks Rank #2 at present. Celsius Holdings delivered an earnings surprise of 200% in the last reported quarter.

The Zacks Consensus Estimate for CELH’s current financial-year sales suggests growth of 84.4% from the year-ago period’s reported figures.

Medifast, which manufactures and distributes weight loss, weight management, healthy living products, and other consumable health and nutritional products, currently carries a Zacks Rank #2.

The Zacks Consensus Estimate for Medifast’s current financial-year sales and EPS suggests growth of 18.9% and 11.5%, respectively, from the year-ago reported figure. MED has a trailing four-quarter earnings surprise of 9.1%, on average.


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