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Sysco's (SYY) Q1 Earnings & Sales Top Estimates, Tumble Y/Y

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Sysco Corporation (SYY - Free Report) reported first-quarter fiscal 2021 results, which reflected headwinds related to COVID-19. During the quarter, both top and bottom lines deteriorated year over year, though they cruised ahead of the Zacks Consensus Estimate. Management remains impressed with its overall cost management as well as the capacity to generate positive free cash flow and profits even after recording a slump in sales. 

Quarter in Detail

The company posted adjusted earnings of 34 cents per share, which surpassed the Zacks Consensus Estimate of 20 cents. However, the bottom line slumped 65.3% from the year-ago period’s adjusted earnings of 98 cents per share. The year-over-year deterioration can be attributed to reduced sales and margins.

Sysco Corporation Price, Consensus and EPS Surprise

Sysco Corporation Price, Consensus and EPS Surprise

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

This global food products maker and distributor reported sales of $11,777.4 million, which plunged 23% year over year due to impacts of the coronavirus pandemic. Nevertheless, the figure surpassed the Zacks Consensus Estimate of $11,497 million. Foreign currency had a favorable impact of about 0.3% on the top line.

Gross profit in the quarter declined 24.6% to $2,219.8 million and the gross margin contracted 39 basis points (bps) to 18.85%. Foreign currency had a positive impact of 0.4% on gross profit. Adjusted operating income of $364.7 million declined 50.8% year over year and the respective margin contracted 175 bps to 3.1%.

We note that this Zacks Rank #4 (Sell) stock has lost 33.3% year to date compared with the industry’s decline of 6.6%.

Segment Details

U.S. Foodservice Operations: During the quarter, segment sales declined 25.7% to $7,921.5 million. Local case volumes within U.S. Broadline operations fell 21.6% (including organic sales decline of 21.7%) and total case volumes dropped 25.8% (wherein organic sales declined 25.9%). Gross profit plunged 25.4% to $1,599.7 million, while gross margin increased 7 bps to 20.19%. U.S. Broadline saw a 1% product cost inflation, mainly due to dairy and meat categories, as well as paper and disposables.

International Foodservice Operations: Segment sales declined 25.7% to $2,163.7 million in the quarter. Foreign exchange fluctuations positively impacted segment sales by 1.4%. On a constant-currency (cc) basis, adjusted sales fell 27.1% to around $2,123 million. At cc, gross profit declined 27.5% to $438.9 million and gross margin fell 11 bps to 20.67%. Currency movements aided the segment’s gross profit by 1.9%.

SYGMA sales grew 5.3% to $1,524.1 million. Gross profit rose 4.5% to $131.5 million, whereas the gross margin contracted 7 bps to 8.63%.

Other segment sales tumbled 41% to approximately $168 million.

Other Updates

Sysco ended the quarter with cash and cash equivalents of $5,985.5 million, long-term debt of $12,422.8 million and total shareholders’ equity of nearly $1,300 million.

During the 13-week period ended Sep 26, 2020, Sysco generated cash flow from operations of $930.9 million and free cash flow amounted to $862.4 million.

Wrapping Up

Sysco remains committed to catering to the evolving needs of its customers and witnessed improved sales trends throughout the fiscal first quarter. Markedly, the company is on track with its business transformation as it navigates through the pandemic. The company’s key transformation objectives include speeding up work across customer-oriented technology and tools, transforming sales to enhance selling efficacy and offer a more customer-oriented structure, restructuring its U.S. Broadline business and emerging as a more efficient entity. 

Looking for Solid Food Stocks? Check These

General Mills (GIS - Free Report) , which carries a Zacks Rank #2 (Buy), has a long-term earnings growth rate of 7.5%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Lamb Weston (LW - Free Report) has a Zacks Rank #2 and a long-term earnings growth rate of 7%.

Flowers Foods (FLO - Free Report) , which also carries a Zacks Rank #2, has a trailing four-quarter earnings surprise of 8.2%, on average.

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