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Why Is Sysco (SYY) Up 1.4% Since Last Earnings Report?

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A month has gone by since the last earnings report for Sysco (SYY - Free Report) . Shares have added about 1.4% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Sysco due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Sysco Q4 Earnings & Sales Top Estimates, Increase Y/Y

Sysco Corporation posted splendid fourth-quarter fiscal 2022 results as both the top and bottom lines grew year over year and came ahead of the Zacks Consensus Estimate. The company marked yet another solid quarter of sales and earnings growth despite the tough environmental landscape. Sysco’s growth outperformed the U.S. market by more than 1.3 times in the full year.

During the quarter, the company continued to progress well in its Recipe for Growth plan, witnessed volume growth and executed an efficient pass-through of high product costs. SYY’s International segment operating income continued to witness recovery.

Sysco’s adjusted earnings of $1.15 per share beat the Zacks Consensus Estimate of $1.12. The bottom line increased from the year-ago period’s earnings of 71 cents per share. On a comparable 13-week basis, adjusted earnings per share (EPS) soared 74.2%.

The global food product maker and distributor reported sales of $18,957.3 million, which jumped 17.5% year over year and beat the Zacks Consensus Estimate of $18,270 million. Foreign currency had an adverse impact of 1.6% on the top line.

The gross profit surged 18.1% to $3,444.3 million, and the gross margin expanded 10 basis points (bps) to 18.2%. The adjusted gross margin rose 33% to 18.4%. This year-over-year growth in the gross profit was fueled by elevated volumes along with efficient inflation management. Foreign currency had a negative impact of 2% on the gross profit. The adjusted operating income of $876.8 million grew $271.6 million from the year-ago period.

Segment Details

U.S. Foodservice Operations: In the reported quarter, the segment witnessed robust sales growth, overall share gains and higher profitability. Sales jumped 16.4% to $13,413.3 million. Local case volumes within U.S. Broadline operations fell 7.8%, and total case volumes dipped 2.1%. The gross profit escalated by 17.5% to $2,601.7 million, and the gross margin rose 17 bps to 19.4%. The U.S. Broadline saw 15.3% product cost inflation, mainly due to the poultry, fresh produce and dairy categories.

International Foodservice Operations: The segment’s sales soared 30.3% to $3,251.8 million in the quarter. Foreign-exchange fluctuations adversely impacted the segment’s sales by 10.1%. On a constant-currency (cc) basis, sales advanced 40.4%. The gross profit jumped 31.4% to $651.8 million, and the gross margin expanded 17 bps to 20%. At cc, the gross profit rose 42.9%. Currency movements hurt the segment’s gross profit by 11.5%.

SYGMA’s sales advanced 5.5% to $1,975.6 million. The gross profit fell from $159.7 million to $153.9 million, while the gross margin contracted from 8.52% to 7.79%.

The Other segment’s sales jumped 27.3% to $316.5 million.

Other Updates

Sysco ended the quarter with cash and cash equivalents of $867.1 million, long-term debt of $10,066.9 million and total shareholders’ equity of $1,382.3 million. In the year ended Jul 2, 2022, the company generated cash flow from operations of $1.8 billion, and free cash flow amounted to $1.2 billion. During the year, Sysco returned $1.5 billion to shareholders through share buybacks worth $500 million and dividends of $959 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

The consensus estimate has shifted -7.77% due to these changes.

VGM Scores

At this time, Sysco has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Sysco has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Sysco is part of the Zacks Food - Miscellaneous industry. Over the past month, Post Holdings (POST - Free Report) , a stock from the same industry, has gained 4.6%. The company reported its results for the quarter ended June 2022 more than a month ago.

Post Holdings reported revenues of $1.52 billion in the last reported quarter, representing a year-over-year change of -4.1%. EPS of $0.69 for the same period compares with $0.93 a year ago.

Post Holdings is expected to post earnings of $0.73 per share for the current quarter, representing a year-over-year change of +65.9%. Over the last 30 days, the Zacks Consensus Estimate has changed +2.8%.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Post Holdings. Also, the stock has a VGM Score of B.


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