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Can Sysco's Key Strategies for 2020 Spur Further Growth?

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Sysco Corporation (SYY - Free Report) recently outlined its key growth strategies at New York Investor Day event, wherein it also highlighted its three-year financial goals. Notably, the company has been gaining from cost-saving and revenue-management efforts for quite some time now, as evident from its impressive past record.

These efforts, along with constant focus on buyouts have helped Sysco gain 13.2% this year, as against the industry’s decline of 6%. So let’s delve deeper into Sysco’s plans to achieve its financial targets for fiscal 2020, and see if it can spur further growth of this Zacks Rank #3 (Hold) company.





 

Sysco’s Core Strategies

Sysco stated that its four core strategies include enhancing consumers’ experience; optimising business; stimulating power of its people and achieving operational efficacy. In this regard, the company remains focused on enhancing assortments, making constant innovations, ensuring food safety and revitalising brands.

Further, to evolve with the changing consumer preferences, Sysco remains committed toward investing in technology and enhancing e-commerce operations.Moreover, the company plans to improve supply chain, increase transparency through technological advancements, enhance deliveries and attain operational efficiency. Clearly, the company intends to keep customers interests at the centre of business.

Well, Sysco’s focus on undertaking innovative technologies to fuel efficiency is clear from its recently announced investment in Tesla (TSLA - Free Report) . Incidentally, the company revealed that it reserved 50 new fully-electric Semi tractors at Tesla to introduce alternative-fuel vehicles to its fleet. This move will not only be environment friendly, but is also likely to curtail Sysco’s fuel and transportation expenses considerably.

Financial Targets

Moving back to the company’s four core strategies, management believes that these will help it achieve its financial goals for fiscal 2020. The company expects gross profit to rise in a band of 55-65%, while it anticipates reducing administrative expenses by 20-25%. Consequently, the company plans to achieve adjusted operating income growth of about $650-$700 million by fiscal 2020 end, reflecting a three-year CAGR of 9%.

Moreover, management envisions earnings per share to grow at a double-digit rate on an average, by 2020. Additionally, the company’s solid balance sheet and free cash flow augmenting ability will help it make business investments, continue with merger and acquisitions, make share buybacks, repay debt and attain a preferred dividend payout ratio of 50-60% over time. Also, Sysco expects ROIC to be roughly 16% in fiscal 2020.

All said, we believe that these strategic priorities are likely to aid the company enhance customers’ experience, drive growth and in turn augment shareholder value.

Looking for More? Check These Consume Staples Stocks

Conagra Brands, Inc. (CAG - Free Report) , with a long-term EPS growth rate of 7% carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Flowers Foods, Inc. (FLO - Free Report) with a long-term EPS growth rate of 6.1% holds the same Zacks Rank as Conagra.

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