We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Can Sysco's (SYY) Shareholder-Friendly Moves Aid the Stock?
Read MoreHide Full Article
Sysco Corporation (SYY - Free Report) is focused on lifting investors’ sentiments through strategic growth initiatives and shareholder-friendly moves. To this end, the company recently announced an 8% hike in its quarterly dividend, taking it from 36 cents a share to 39 cents. This is payable on Jan 25, 2019 to shareholders of record as on Jan 4.
Sysco has been committed toward boosting shareholders’ returns for quite a few years now. In fact, this marks the 50th hike for the food company, which has been paying dividends every quarter since 1970. The last hike of 3 cents or 9% was announced on Nov 17, 2017. Well, we appreciate Sysco’s efforts to consistently enhance long-term shareholder value. Markedly, dividend hikes not only enhance shareholder returns but also raise the market value of the stock. Through this strategy, companies try to win investors and persuade them to either buy or hold the scrip instead of selling it.
Apart from dividend hikes, Sysco also concentrates on other efficient capital allocation strategies, like prudent mergers and acquisitions, share buybacks, debt repayment, and capital expenditures. Notably, the company expects capital expenditures to be about 1.2% of sales, and it also recently announced a modest raise to its planned share buybacks of $1 billion for fiscal 2019.
Talking of mergers and acquisitions, the company has been carrying out various acquisitions over the years to grow its distribution network and customer base, and boost long-term growth. To this end, Sysco concluded several meaningful acquisitions in fiscal 2018, including HFM in Hawaii, Doerle Food Service in Louisiana and Kent Frozen Foods in the U.K. Previous moves in this regard include the buyout of Supplies on the Fly, North Star Seafood, Gilchrist & Soames and 50% stake in Mexico-based Pacific Star Foodservice, among others. These moves clearly highlight Sysco’s efforts to uplift investors’ confidence in the stock.
What’s Troubling Sysco?
Unfortunately, this Zacks Rank #4 (Sell) stock has been witnessing cost inflation, which has been denting its margins. The company encountered cost-related headwinds in the first quarter of fiscal 2019 as well, mainly due to a tight U.S. labor market. Moreover, gross margin in this segment contracted 7 basis points (bps) to 20.10%, caused by a fall in food-cost inflation in U.S. Broadline, particularly due to meat, poultry and produce-category deflation.
During the quarter, operating expenses in the U.S. Foodservice unit increased 5.8%, due to higher supply-chain expenses related to both transport and warehouse. In fact, warehouse and transportation related costs also posed concerns to the company’s SYGMA unit and the International segment’s Canada region. The company’s International unit also incurred increased costs related to investments in integration and transformation, which is likely to linger. Further, increased fuel costs led to escalated U.S. Foodservice unit operating expenses, which also included overtime costs and other costs related to additional hiring owing to a tight labor market.
The company expects its warehouse and transportation costs associated with supply chain to persist, which is a threat to margins. These worries along with a lower-than-expected first-quarter performance seem to have hurt Sysco’s stock that has tumbled 11.2% in the past three months compared with the industry’s decline of 4.7%. Nonetheless, we expect Sysco’s shareholder-friendly moves, strategic growth endeavors and strength of its U.S. Foodservice Operations to help it counter these hurdles and aid the stock to revive.
McCormick & Company, Incorporated (MKC - Free Report) has long-term earnings per share growth rate of 9% and a Zacks Rank #2 (Buy).
Lamb Weston (LW - Free Report) , with a Zacks Rank #2, has long-term earnings per share growth rate of 11.8%.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
Image: Bigstock
Can Sysco's (SYY) Shareholder-Friendly Moves Aid the Stock?
Sysco Corporation (SYY - Free Report) is focused on lifting investors’ sentiments through strategic growth initiatives and shareholder-friendly moves. To this end, the company recently announced an 8% hike in its quarterly dividend, taking it from 36 cents a share to 39 cents. This is payable on Jan 25, 2019 to shareholders of record as on Jan 4.
Sysco has been committed toward boosting shareholders’ returns for quite a few years now. In fact, this marks the 50th hike for the food company, which has been paying dividends every quarter since 1970. The last hike of 3 cents or 9% was announced on Nov 17, 2017. Well, we appreciate Sysco’s efforts to consistently enhance long-term shareholder value. Markedly, dividend hikes not only enhance shareholder returns but also raise the market value of the stock. Through this strategy, companies try to win investors and persuade them to either buy or hold the scrip instead of selling it.
Apart from dividend hikes, Sysco also concentrates on other efficient capital allocation strategies, like prudent mergers and acquisitions, share buybacks, debt repayment, and capital expenditures. Notably, the company expects capital expenditures to be about 1.2% of sales, and it also recently announced a modest raise to its planned share buybacks of $1 billion for fiscal 2019.
Talking of mergers and acquisitions, the company has been carrying out various acquisitions over the years to grow its distribution network and customer base, and boost long-term growth. To this end, Sysco concluded several meaningful acquisitions in fiscal 2018, including HFM in Hawaii, Doerle Food Service in Louisiana and Kent Frozen Foods in the U.K. Previous moves in this regard include the buyout of Supplies on the Fly, North Star Seafood, Gilchrist & Soames and 50% stake in Mexico-based Pacific Star Foodservice, among others. These moves clearly highlight Sysco’s efforts to uplift investors’ confidence in the stock.
What’s Troubling Sysco?
Unfortunately, this Zacks Rank #4 (Sell) stock has been witnessing cost inflation, which has been denting its margins. The company encountered cost-related headwinds in the first quarter of fiscal 2019 as well, mainly due to a tight U.S. labor market. Moreover, gross margin in this segment contracted 7 basis points (bps) to 20.10%, caused by a fall in food-cost inflation in U.S. Broadline, particularly due to meat, poultry and produce-category deflation.
During the quarter, operating expenses in the U.S. Foodservice unit increased 5.8%, due to higher supply-chain expenses related to both transport and warehouse. In fact, warehouse and transportation related costs also posed concerns to the company’s SYGMA unit and the International segment’s Canada region. The company’s International unit also incurred increased costs related to investments in integration and transformation, which is likely to linger. Further, increased fuel costs led to escalated U.S. Foodservice unit operating expenses, which also included overtime costs and other costs related to additional hiring owing to a tight labor market.
The company expects its warehouse and transportation costs associated with supply chain to persist, which is a threat to margins. These worries along with a lower-than-expected first-quarter performance seem to have hurt Sysco’s stock that has tumbled 11.2% in the past three months compared with the industry’s decline of 4.7%. Nonetheless, we expect Sysco’s shareholder-friendly moves, strategic growth endeavors and strength of its U.S. Foodservice Operations to help it counter these hurdles and aid the stock to revive.
Don’t Miss These Solid Food Stocks
Chefs’ Warehouse (CHEF - Free Report) , with long-term earnings per share growth rate of 19%, carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
McCormick & Company, Incorporated (MKC - Free Report) has long-term earnings per share growth rate of 9% and a Zacks Rank #2 (Buy).
Lamb Weston (LW - Free Report) , with a Zacks Rank #2, has long-term earnings per share growth rate of 11.8%.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot trades we're targeting>>