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Factors to Note as Sysco (SYY) Queues Up for Q3 Earnings

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Sysco Corporation (SYY - Free Report) is likely to witness year-over-year growth in its top and bottom lines when it reports third-quarter fiscal 2022 earnings on May 10. The Zacks Consensus Estimate for revenues is pegged at $16,065 million, suggesting a rise of 35.9% from the prior-year quarter’s reported figure.

The Zacks Consensus Estimate for earnings has remained unchanged over the past 30 days at 54 cents per share. This indicates an increase of 145.5% from the figure reported in the prior-year period. Sysco has a trailing four-quarter earnings surprise of 3.7%, on average. This food company delivered a negative earnings surprise of 17.4% in the last reported quarter.

Sysco Corporation Price, Consensus and EPS Surprise

Sysco Corporation Price, Consensus and EPS Surprise

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

Key Factors to Consider

Sysco has been gaining on its focus on the Recipe for Growth, which involves five strategic priorities. The five strategic pillars include enhancing customers’ experience via digital tools. In this regard, the company’s Sysco Shop platform and the new pricing software are working well. Further, SYY is focused on improving the supply chain to cater to customers efficiently and consistently with 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 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. Sysco is progressing well with its Recipe for Growth and earlier unveiled plans to generate cost curtailments of $750 million for the period of FY21 to FY24. These upsides bode well for the quarter under review.

Sysco has been benefiting from its various acquisitions, which have been strengthening the company’s distribution network and customer base. In February 2022, Sysco concluded the buyout of The Coastal Companies, a well-known fresh produce distributor and value-added processer. The acquired business will operate under Sysco’s specialty produce business – FreshPoint. The move will strategically diversify Sysco’s portfolio by adding retail and ready-to-eat capabilities along with state-of-the-art facilities. The company acquired Greco and Sons in the first quarter of fiscal 2022, which delivered a strong performance in the second quarter. The inclusion of Greco and Sons helps Sysco better cater to Italian-focused customers. We note that this acquisition goes in tandem with Sysco’s Recipe for Growth. Contributions from these buyouts are likely to aid results in the quarter under review.

Food cost inflation, supply-chain hurdles and increased operating costs pose threats to SYY. Sysco’s second-quarter bottom line was affected by greater-than-anticipated operating costs stemming from the pandemic. Apart from double-digit inflation, the company also countered productivity hurdles and its snapback and transformation investments, which amounted to $73 million in the quarter. The company also spent $44 million as an operating expense investment associated with its Recipe for Growth plan. Additionally, Sysco encountered productivity expense challenges in the quarter. All of these led to a spike in adjusted operating expenses. The persistence of these hurdles remains a concern.

Sysco witnessed increased supply-chain hurdles in the second quarter due to the pandemic, which, in turn, led to elevated transport and labor costs. On its last earnings call, management stated that it expects these challenges to persist in the near term. Apart from this, management expects Omicron to have continued affecting sales in the third quarter. Adjusted earnings per share (EPS) in the back half of fiscal 2022 are envisioned in the range of roughly $1.60-$1.70.

What the Zacks Model Unveils

Our proven model doesn’t conclusively predict an earnings beat for Sysco this time. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is not the case here.

Sysco currently has a Zacks Rank #2 and an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks With the Favorable Combination

Here are some companies that you may want to consider as our model shows that these have the right combination of elements to post an earnings beat in the to-be-reported quarter.

Olapex (OLPX - Free Report) has an Earnings ESP of +6.93% and a Zacks Rank #2. The company is expected to report first-quarter 2022 results on May 11. The consensus mark for Olapex’s revenues is pegged at $172.2 million. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Olapex’s quarterly EPS of 11 cents has remained unchanged over the past 30 days. OLPX’s EPS matched the Zacks Consensus Estimate in the last reported quarter.

US Foods (USFD - Free Report) has an Earnings ESP of +12.34% and a Zacks Rank #3. The company is expected to register top and bottom-line growth when it reports first-quarter 2022 results.

The Zacks Consensus Estimate for US Foods’ bottom line stands at 31 cents per share, which suggests a rise of 158.3% from the year-ago period’s reported figure. USFD has a trailing four-quarter earnings surprise of 33.6%, on average.

Celsius Holdings (CELH - Free Report) has an Earnings ESP of +12.50% and a Zacks Rank #3. It is anticipated to register a top and bottom-line increase when it reports first-quarter 2022 results. The Zacks Consensus Estimate for Celsius Holdings’ revenues is pegged at $117.6 million, indicating growth of 135.1% from the figure reported in the prior-year quarter.

The Zacks Consensus Estimate for Celsius Holdings’ quarterly earnings is pegged at 3 cents per share, suggesting a rise of 200% from the year-ago quarter’s reported figure. CELH delivered an earnings beat of 156.3%, on average, in the trailing four quarters.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.