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Sysco (SYY) Beats on Q3 Earnings & Sales, Raises EPS View

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Sysco Corporation (SYY - Free Report) posted strong third-quarter fiscal 2022 results, wherein both top and bottom lines increased year over year and cruised past the Zacks Consensus Estimate. The company’s performance surpassed management’s anticipation and led to a raised earnings per share view.

The Zacks Rank #2 (Buy) company witnessed strong consumer and customer away-from-home demand in late February and March, as it snapped back from the Omicron impact. Further, the company continued to witness robust market share gains in the United States and internationally, reflecting strength in its Recipe for Growth plan. Sysco witnessed considerable volume gains. It also delivered increased gross profit per case, thanks to its efforts to counter product and fuel inflation. The company made solid improvements in operating expense leverage, including reduced snapback expenses.

Quarter in Detail

This company’s adjusted earnings of 71 cents per share crushed the Zacks Consensus Estimate of 54 cents. The bottom line increased considerably from the year-ago period’s earnings of 22 cents per share.

Sysco Corporation Price, Consensus and EPS Surprise

Sysco Corporation Price, Consensus and EPS Surprise

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

The global food product maker and distributor reported sales of $16,902.1 million, which soared 42.9% year over year and beat the Zacks Consensus Estimate of $16,065 million. Foreign currency had an adverse impact of 0.7% on the top line.

Gross profit surged 42% to $3,013.4 million, while the gross margin contracted 12 basis points (bps) to 17.8%. Adjusted gross margin rose 5% to 18%. This year-over-year growth in gross profit was fueled by elevated volumes along with efficient inflation management. Foreign currency had a negative impact of 0.9% on gross profit. Adjusted operating income of $575.4 million grew $319.2 million from the year-ago period.

Zacks Investment Research
Image Source: Zacks Investment Research

Segment Details

U.S. Foodservice Operations: In the reported quarter, segment sales jumped 43.6% to $12,006.2 million. Local case volumes within U.S. Broadline operations jumped 14.1% and total case volumes surged 18.8%. Both of these increases reflect organic improvements. Gross profit escalated by 38.9% to roughly $2,270 million and the gross margin fell 64 bps to 18.91%. The U.S. Broadline saw 15.8% product cost inflation mainly due to the poultry, fresh produce and dairy categories.

International Foodservice Operations: Segment sales soared 64.5% to $2,834.1 million in the quarter. Foreign-exchange fluctuations adversely impacted segment sales by 4.8%. On a constant-currency (cc) basis, sales advanced 69.3% to $2,917.8 million. Gross profit jumped 75.4% to $570.2 million and the gross margin expanded 125 bps to 20.12%. At cc, gross profit rose 81.6% to $590.6 million. Currency movements hurt the segment’s gross profit by 6.2%.

SYGMA’s sales advanced 13.5% to $1,794.8 million. Gross profit rose 10.3% to about $147.2 million, while the gross margin contracted 24 bps to 8.2%.

Other segment’s sales jumped 66.4% to $267.1 million.

Other Updates

Sysco ended the quarter with cash and cash equivalents of $876.1 million, long-term debt of $10,608.8 million and total shareholders’ equity of $1,321.4 million. In the 39-week period ended Apr 2, 2022, the company generated cash flow from operations of $745.9 million and free cash flow amounted to $434.3 million.

Guidance

The robust third-quarter performance reflects solid demand as well as strong progress in the company’s transformation efforts. Sysco generated profitability despite the double-digit inflation as well as focused snap back and transformation investments. Management remains optimistic about its business and raised its adjusted earnings per share guidance for fiscal 2022. Sysco now expects earnings per share of $3.16-$3.26, up from the previous view of $3-$3.10.

Shares of the company have dipped 1.2% in the past six three compared with the industry’s growth of 2.8%.

Looking for More Consumer Staple Stocks? Check These

Other well-ranked stocks are McCormick & Company (MKC - Free Report) , Olapex Holdings (OLPX - Free Report) and Inter Parfums (IPAR - Free Report) .

McCormick, the manufacturer, marketer and distributor of spices, seasoning mixes and condiments, currently carries a Zacks Rank #2. Shares of McCormick have dipped 1.9% in the past three months. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for McCormick’s current financial-year sales and EPS suggests growth of nearly 5% and 3.9%, respectively, from the year-ago reported figure. MKC has a trailing four-quarter earnings surprise of around 1.3%, on average.

Olaplex, which manufactures and sells hair care products, carries a Zacks Rank #2, at present. OLPX’s earnings per share matched the Zacks Consensus Estimate in the last reported quarter.
 
The Zacks Consensus Estimate for Olaplex’s current financial year sales and EPS suggests growth of 37.2% and 35%, respectively, from the year-ago period’s reported figures.

Inter Parfums, which manufactures, markets and distributes a range of fragrances and fragrance-related products, currently carries a Zacks Rank #2. Shares of Inter Parfums have dropped 17.7% in the past three months.

The Zacks Consensus Estimate for Inter Parfums’ current financial-year sales and EPS suggests growth of 12.5% and 10.3%, respectively, from the year-ago reported figure. IPAR has a trailing four-quarter earnings surprise of 46.7%, on average.