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Sysco Rides on Buyouts: Kent Frozen Deal to Add More Impetus?
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Sysco Corporation (SYY - Free Report) has been the market’s darling of late, courtesy of numerous growth initiatives. With focus on acquisitions being one of the key endeavors, the stock has rallied 20.9% in a year, faring way better than the industry that tumbled 14.3% in the same time frame. Rolling on these lines, the company recently concluded the previously announced buyout of Kent Frozen Foods – following which its shares have gained 4.9%.
Given this bullish run over just two trading sessions, we remain quite encouraged about the prospects from this take over, among the other strategies driving this Zacks Rank #3 (Hold) company.
What Kent Frozen Acquisition Means for Sysco?
Sysco brought U.K.-based Kent Frozen Foods under its wings on Apr 3, which will form part of the company’s international operations, thereby being an addition to its existing Brakes, Fresh Direct and M&J Seafood businesses. Following the approval of the Competition and Markets Authority, the deal was concluded in an all-cash basis.
Although Kent Frozen Foods will continue to function as a separate entity, it is set to gain from Sysco’s superior hold and brand image in the foodservice market. Further, the deal will enable Kent to establish closer ties with other businesses of Sysco in the U.K. and European regions. While Sysco’s U.S. Foodservice operations has long been a growth driver for the company, this buyout is likely to fuel its International segment.
Well, sales at the International Foodservice segment increased 9.3% to roughly $2,869 million in the last reported quarter. Adjusted operating income tanked 28.8% to $79 million. While results in Canada gained strength from surge in local cases and efficient expense management, the company’s European business remained difficult. This stemmed from the amendment from the calendar year to fiscal, which weighed on costs and gross profit. Also, the company incurred higher costs in Europe due to constant investments in transformation endeavors. However, these initiatives poise the company well for the long term.
Focus on Buyouts: A Major Key to Sysco’s Success
Notably, acquisitions have always been profitable and aided in augmenting Sysco’s market share and distribution network, thereby boosting long-term growth prospects. Notably, the company expects to achieve 0.5-1% sales growth through acquisitions, in the long run. In fact, earlier this year, the company acquired Doerle Food Services (a Louisiana-based food service distributor) to widen its U.S. distribution network. This buyout is expected to Strengthen Sysco’s core business and maximize customers’ value.
Looking back, in 2017, Sysco acquired HFM FoodService and the remaining 50% stake in Mayca Distribuidores to enhance its U.S. and international businesses, respectively. Apart from that, Sysco’s acquisition of London-based Brakes Group in 2016 has been benefiting the company significantly and is expected to generate sales of approximately $55 billion annually.
That said, we expect the addition of Kent Frozen Foods to add yet another leaf to Sysco’s growth story, by driving the performance of its international segment.
Looking for More Promising Bets? Check These Solid Food Stocks
Flowers Foods (FLO - Free Report) , with a long-term EPS growth rate of 6.1%, carries a Zacks Rank of 2 (Buy).
Conagra Brands (CAG - Free Report) , a Zacks #2 Ranked stock, has witnessed positive estimate revisions in the last 30 days.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
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Sysco Rides on Buyouts: Kent Frozen Deal to Add More Impetus?
Sysco Corporation (SYY - Free Report) has been the market’s darling of late, courtesy of numerous growth initiatives. With focus on acquisitions being one of the key endeavors, the stock has rallied 20.9% in a year, faring way better than the industry that tumbled 14.3% in the same time frame. Rolling on these lines, the company recently concluded the previously announced buyout of Kent Frozen Foods – following which its shares have gained 4.9%.
Given this bullish run over just two trading sessions, we remain quite encouraged about the prospects from this take over, among the other strategies driving this Zacks Rank #3 (Hold) company.
What Kent Frozen Acquisition Means for Sysco?
Sysco brought U.K.-based Kent Frozen Foods under its wings on Apr 3, which will form part of the company’s international operations, thereby being an addition to its existing Brakes, Fresh Direct and M&J Seafood businesses. Following the approval of the Competition and Markets Authority, the deal was concluded in an all-cash basis.
Although Kent Frozen Foods will continue to function as a separate entity, it is set to gain from Sysco’s superior hold and brand image in the foodservice market. Further, the deal will enable Kent to establish closer ties with other businesses of Sysco in the U.K. and European regions. While Sysco’s U.S. Foodservice operations has long been a growth driver for the company, this buyout is likely to fuel its International segment.
Well, sales at the International Foodservice segment increased 9.3% to roughly $2,869 million in the last reported quarter. Adjusted operating income tanked 28.8% to $79 million. While results in Canada gained strength from surge in local cases and efficient expense management, the company’s European business remained difficult. This stemmed from the amendment from the calendar year to fiscal, which weighed on costs and gross profit. Also, the company incurred higher costs in Europe due to constant investments in transformation endeavors. However, these initiatives poise the company well for the long term.
Focus on Buyouts: A Major Key to Sysco’s Success
Notably, acquisitions have always been profitable and aided in augmenting Sysco’s market share and distribution network, thereby boosting long-term growth prospects. Notably, the company expects to achieve 0.5-1% sales growth through acquisitions, in the long run. In fact, earlier this year, the company acquired Doerle Food Services (a Louisiana-based food service distributor) to widen its U.S. distribution network. This buyout is expected to Strengthen Sysco’s core business and maximize customers’ value.
Looking back, in 2017, Sysco acquired HFM FoodService and the remaining 50% stake in Mayca Distribuidores to enhance its U.S. and international businesses, respectively. Apart from that, Sysco’s acquisition of London-based Brakes Group in 2016 has been benefiting the company significantly and is expected to generate sales of approximately $55 billion annually.
That said, we expect the addition of Kent Frozen Foods to add yet another leaf to Sysco’s growth story, by driving the performance of its international segment.
Looking for More Promising Bets? Check These Solid Food Stocks
United Natural (UNFI - Free Report) with a long-term earnings growth rate of 8.2% sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Flowers Foods (FLO - Free Report) , with a long-term EPS growth rate of 6.1%, carries a Zacks Rank of 2 (Buy).
Conagra Brands (CAG - Free Report) , a Zacks #2 Ranked stock, has witnessed positive estimate revisions in the last 30 days.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
See Them Free>>