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Sysco (SYY) Unveils Recipe for Growth, Offers Financial Targets

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Sysco Corporation (SYY - Free Report) is clearly on the growth track, which becomes all the more evident from its strategy update as well as transformation initiatives highlighted at its 2021 Investor Day on May 20. In a separate press release, the company also said that it has entered a deal to buy Greco and Sons from Arbor Investments and the Greco family, which reflects its focus on achieving growth via acquisitions. Let’s delve deeper.

Growth Initiatives & Financial Targets

Sysco on its Investor Day unveiled its efforts to transform into a more growth-oriented, customer-focused and innovative company. To this end, it spoke about its Recipe for Growth, which involves five strategic priorities aimed at enabling the company to grow 1.5 times faster than the market by FY24 end. 

The five strategic pillars include enhancing customers’ experience via digital tools. Further, the company is focused on improving the supply chain to cater to customers efficiently and consistently, on the back of better delivery and omnichannel inventory management. Next, Sysco aims at providing customer-oriented merchandising and marketing solutions to augment sales. The company also targets having a team-based selling, with emphasis on important cuisines. Finally, Sysco is focused on cultivating new capacities, channels and segments, alongside sponsoring investments via cost-saving initiatives.

Incidentally, Sysco offered financial guidance for the coming years, as part of which it targets cost curtailments of $750 million for the period FY21 to FY24. For FY22, the company envisions earnings per share of $3.23-$3.43. For FY24, management expects adjusted EPS to be more than 30% higher than the bottom line in FY19. Sysco also anticipates a net leverage goal of 2.5x-2.75x adjusted EBITDA, to be backed by plans to lower debt by at least another $1.5 billion in FY21 and FY22. Additionally, it unveiled a share buyback plan of $5 billion, which will be available till it is fully used up.

Apart from these, management unveiled a dividend hike of 2 cents per share, taking it to 47 cents a share. This is payable on Jul 23, 2021, to shareholders of record as of Jul 2. Notably, this marks the company’s 52nd straight annual dividend hike.

Greco and Sons’ Buyout to Aid

Sysco’s above-mentioned acquisition of Greco and Sons also goes in tandem with its Recipe for Growth. Markedly, Greco and Sons is a leading independent Italian specialty distributor, with annual revenues of roughly $800 million. The company operates 10 distribution centers, catering to 22 geographies across the country. Further, it provides more than 15,000 products and services across 8,000 customers, such as restaurants, country clubs, hotels, pizzerias, schools and bars, to name a few.

Greco and Sons produces value-added specialty meat products and imports and distributes a full line of superior-quality food and non-food products. The company will operate as a standalone unit within Sysco, once the acquisition deal is closed. Certainly, the inclusion of Greco and Sons is likely to help Sysco better cater to Italian-focused customers. It is most likely to benefit from Greco and Sons’ solid expertise, impressive product selection and efficient customer service.

All said, we believe that the abovementioned strategic objectives keep Sysco well placed for growth. Shares of this Zacks Rank #3 (Hold) company have gained 13.7% in the past six months compared with the industry’s growth of 13.9%.

3 Solid Consumer Staple Bets

Medifast (MED - Free Report) , which currently carries a Zacks Rank #1 (Strong Buy), has a trailing four-quarter earnings surprise of 12.7%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

United Natural (UNFI - Free Report) has a Zacks Rank #2 (Buy) and its bottom line outpaced the Zacks Consensus Estimate by 13.6% in the trailing four quarters, on average.

Hain Celestial (HAIN - Free Report) has a Zacks Rank #2 and its bottom line outpaced the Zacks Consensus Estimate by 26.4% in the trailing four quarters, on average.

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