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Sysco (SYY) Q2 Earnings Lag Estimates on High Costs, Sales Rise

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Sysco Corporation SYY posted second-quarter fiscal 2022 results, wherein the top and bottom lines increased year over year and the former came ahead of the Zacks Consensus Estimate.

In the quarter, Sysco continued to witness robust market share gains due to its Recipe for Growth plan as well as relative supply-chain strength. Management has been committed to prioritizing top and bottom-line improvements while combating inflation efficiently. The company navigated well amid double-digit inflation, productivity hurdles and its snap back and transformation investments.

Sysco’s second-quarter bottom line was affected by greater-than-anticipated operating costs stemming from the pandemic. Also, the Omicron variant weighed on the customers’ top line as well as operating hours.

Quarter in Detail

This Zacks Rank #4 (Sell) company’s adjusted earnings of 57 cents per share missed the Zacks Consensus Estimate of 69 cents. However, the bottom line increased considerably from the year-ago period’s earnings of 17 cents per share.

The global food product maker and distributor reported sales of $16,320.2 million, which soared 41.2% year over year and beat the Zacks Consensus Estimate of $16,025 million. Management stated that sales growth decelerated in December due to hurdles stemming from the Omicron variant. Foreign currency had a favorable impact of 0.3% on the top line.

Gross profit surged 37.8% to $2,891.2 million, while the gross margin contracted 44 basis points (bps) to 17.7%. This year-over-year growth in gross profit was fueled by elevated volumes along with efficient inflation management. Foreign currency had a positive impact of 0.2% on gross profit. Adjusted operating income of $495.7 million grew $261.6 million from the year-ago period.

Segment Details

U.S. Foodservice Operations: In the reported quarter, segment sales jumped 45.1% to $11,498.2 million. Local case volumes within U.S. Broadline operations jumped 17.6% and total case volumes surged 22.5%. Both of these increases reflect organic improvements. Gross profit escalated by 37.2% to $2,139.3 million and the gross margin fell 107 bps to 18.6%. The U.S. Broadline saw 14.6% product cost inflation mainly due to the meat and poultry categories.

International Foodservice Operations: Segment sales soared 42.6% to $2,806.3 million in the quarter. Foreign-exchange fluctuations positively impacted segment sales by 1.7%. On a constant-currency (cc) basis, sales advanced 40.9% to $2,772.2 million. Gross profit jumped 51.4% to $565.9 million and the gross margin expanded 116 bps to 20.2%. At cc, gross profit rose 50.3% to $561.9 million. Currency movements aided the segment’s gross profit by 1.1%.

SYGMA’s sales advanced 16.5% to $1,771.3 million. Gross profit rose 5.9% to about $137 million, while the gross margin contracted 77 bps to 7.73%.

Other segment’s sales jumped 66.7% to $244.5 million.

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Zacks Investment Research

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Other Updates

Sysco ended the quarter with cash and cash equivalents of $1,374.3 million, long-term debt of $10,593.4 million and total shareholders’ equity of $1,221.1 million. In the first half of fiscal 2022, the company generated cash flow from operations of $377 million and free cash flow amounted to $201.1 million.

In the second quarter, SYY repurchased shares worth $416 million.

Shares of the company have increased 8.8% in the past six months compared with the industry’s growth of 1.2%.

Looking for Solid Consumer Staple Stocks? Check These

Some top-ranked stocks are Helen of Troy HELE, Flowers Foods (FLO) and Medifast, Inc. MED

Helen of Troy, a designer, developer, marketer, importer and distributor, carries a Zacks Rank #1 (Strong Buy) at present. Shares of Helen of Troy have dipped 10.3% in the past six months. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Helen of Troy’s current financial-year sales and earnings per share (EPS) suggests growth of 0.8% and 0.6%, respectively, from the year-ago reported number. HELE has a trailing four-quarter earnings surprise of 19.1%, on average.

Flowers Foods, which produces and markets packaged bakery products, carries a Zacks Rank #2 (Buy). Shares of Flowers Foods have moved up 23.7% in the past six months.

The Zacks Consensus Estimate for Flowers Foods' current financial-year sales and EPS suggests growth of 5.1% and 8.8%, respectively, from the year-ago reported number. FLO has a trailing four-quarter earnings surprise of 35.4%, on average.

Medifast, the manufacturer and distributor of weight loss, weight management, healthy living products, and other consumable health and nutritional products, currently carries a Zacks Rank #2. Shares of Medifast have dropped 21.7% in the past six months.

The Zacks Consensus Estimate for Medifast’s current financial-year sales and EPS suggests growth of about 63% and 49.3%, respectively, from the year-ago reported figure. MED has a trailing four-quarter earnings surprise of 17.3%, on average.


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