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Sysco's (SYY) Recipe for Growth Solid, Product Costs High
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Sysco Corporation (SYY - Free Report) has been benefiting from its Recipe for Growth program. The company’s diversified business has also been a driver. The impact of these upsides was visible in the company’s first-quarter fiscal 2023 results, wherein the top and bottom lines grew year over year and the former came ahead of the Zacks Consensus Estimate.
The company saw a double-digit rise in earnings and sales as it efficiently managed inflation and witnessed a case volume increase and higher market share. On its first-quarter earnings call, management stated that it remains optimistic about its business while remaining cautious of the macroeconomic landscape.
Factors Backing Sysco
Sysco has been focused on its Recipe for Growth, which is strengthening the company’s capacities across sales and the supply chain. The program involves five strategic priorities aimed at enabling SYY to grow 1.5 times faster than the market by FY24 end. 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, Sysco 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 team-based selling, with an emphasis on important cuisines. Finally, Sysco is focused on cultivating new capacities, channels and segments alongside sponsoring investments via cost-saving initiatives.
Sysco Corporation Price, Consensus and EPS Surprise
Sysco is a diversified company, which covers every part of the food away from home market. The company’s operations are diversified across different customer types, product categories and geographies.
Sysco caters to restaurants of all price-point spectrums and types. It also caters to health care and education facilities, alongside travel and recreation facilities in office buildings. Travel and recreation facilities are seeing a continued revival and are likely to be a growth area in the coming years.
Moreover, Sysco has been carrying out various acquisitions over the years to grow its distribution network and customer base and boost long-term growth. In February 2022, the company concluded the acquisition of The Coastal Companies, which operates under Sysco’s specialty produce business – FreshPoint. Before this, SYY acquired Greco and Sons in the first quarter of fiscal 2022. We note that these acquisitions go in tandem with Sysco’s Recipe for Growth.
Cost Woes Persist
Sysco has been encountering product cost inflation in the U.S. Foodservice unit for a while now. In the first quarter of fiscal 2023, the company witnessed product cost inflation of 9.7%, which was measured by estimated changes in product costs, mainly in the dairy and frozen categories. The U.S. Broadline saw 12% product cost inflation, which was measured by estimated changes in product costs, mainly in the dairy and frozen categories. The persistence of such trends poses threats to margins.
For fiscal 2023, management earlier projected inflation in the mid-single digits across all categories. Sysco also expects increased operating costs in the fiscal year due to transformation investments and a tough hiring landscape.
The Bottom Line
We believe that the abovementioned upsides are likely to help Sysco tide over cost hurdles. On its last earnings call, management reiterated its adjusted earnings per share guidance range of $4.09-$4.39 for fiscal 2023, suggesting 26-35% growth from the year-ago period. Sysco remains on track to grow more than 1.35 times the market in fiscal 2023.
Shares of this Zacks Rank #3 (Hold) company have dipped 1.1% in the past three months against the industry’s growth of 8.6%.
The Chef's Warehouse, which distributes specialty food products, currently sports a Zacks Rank #1 (Strong Buy). The Chef's Warehouse has a trailing four-quarter earnings surprise of 93.8%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for CHEF’s current financial-year sales suggests an increase of 46.5% from the year-ago reported number, while earnings indicate significant growth.
Conagra Brands, which operates as a consumer-packaged goods food company, currently carries a Zacks Rank of 2 (Buy). CAG has a trailing four-quarter earnings surprise of 1.8%, on average.
The Zacks Consensus Estimate for Conagra Brands’ current financial-year sales and earnings suggests growth of 5.2% and 3.4%, respectively, from the corresponding year-ago reported figures.
McCormick, a manufacturer, marketer and distributor of spices, seasoning mixes and condiments, currently carries a Zacks Rank #2. MKC delivered an earnings surprise of 6.2% in the last reported quarter.
The Zacks Consensus Estimate for McCormick’s current financial-year sales suggests growth of 1.8% from the year-ago reported figure.
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Sysco's (SYY) Recipe for Growth Solid, Product Costs High
Sysco Corporation (SYY - Free Report) has been benefiting from its Recipe for Growth program. The company’s diversified business has also been a driver. The impact of these upsides was visible in the company’s first-quarter fiscal 2023 results, wherein the top and bottom lines grew year over year and the former came ahead of the Zacks Consensus Estimate.
The company saw a double-digit rise in earnings and sales as it efficiently managed inflation and witnessed a case volume increase and higher market share. On its first-quarter earnings call, management stated that it remains optimistic about its business while remaining cautious of the macroeconomic landscape.
Factors Backing Sysco
Sysco has been focused on its Recipe for Growth, which is strengthening the company’s capacities across sales and the supply chain. The program involves five strategic priorities aimed at enabling SYY to grow 1.5 times faster than the market by FY24 end. 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, Sysco 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 team-based selling, with an emphasis on important cuisines. Finally, Sysco is focused on cultivating new capacities, channels and segments alongside sponsoring investments via cost-saving initiatives.
Sysco Corporation Price, Consensus and EPS Surprise
Sysco Corporation price-consensus-eps-surprise-chart | Sysco Corporation Quote
Sysco is a diversified company, which covers every part of the food away from home market. The company’s operations are diversified across different customer types, product categories and geographies.
Sysco caters to restaurants of all price-point spectrums and types. It also caters to health care and education facilities, alongside travel and recreation facilities in office buildings. Travel and recreation facilities are seeing a continued revival and are likely to be a growth area in the coming years.
Moreover, Sysco has been carrying out various acquisitions over the years to grow its distribution network and customer base and boost long-term growth. In February 2022, the company concluded the acquisition of The Coastal Companies, which operates under Sysco’s specialty produce business – FreshPoint. Before this, SYY acquired Greco and Sons in the first quarter of fiscal 2022. We note that these acquisitions go in tandem with Sysco’s Recipe for Growth.
Cost Woes Persist
Sysco has been encountering product cost inflation in the U.S. Foodservice unit for a while now. In the first quarter of fiscal 2023, the company witnessed product cost inflation of 9.7%, which was measured by estimated changes in product costs, mainly in the dairy and frozen categories. The U.S. Broadline saw 12% product cost inflation, which was measured by estimated changes in product costs, mainly in the dairy and frozen categories. The persistence of such trends poses threats to margins.
For fiscal 2023, management earlier projected inflation in the mid-single digits across all categories. Sysco also expects increased operating costs in the fiscal year due to transformation investments and a tough hiring landscape.
The Bottom Line
We believe that the abovementioned upsides are likely to help Sysco tide over cost hurdles. On its last earnings call, management reiterated its adjusted earnings per share guidance range of $4.09-$4.39 for fiscal 2023, suggesting 26-35% growth from the year-ago period. Sysco remains on track to grow more than 1.35 times the market in fiscal 2023.
Shares of this Zacks Rank #3 (Hold) company have dipped 1.1% in the past three months against the industry’s growth of 8.6%.
Looking for Consumer Staple Stocks? Check These
Some better-ranked stocks are The Chef's Warehouse (CHEF - Free Report) , Conagra Brands (CAG - Free Report) and McCormick & Company (MKC - Free Report) .
The Chef's Warehouse, which distributes specialty food products, currently sports a Zacks Rank #1 (Strong Buy). The Chef's Warehouse has a trailing four-quarter earnings surprise of 93.8%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for CHEF’s current financial-year sales suggests an increase of 46.5% from the year-ago reported number, while earnings indicate significant growth.
Conagra Brands, which operates as a consumer-packaged goods food company, currently carries a Zacks Rank of 2 (Buy). CAG has a trailing four-quarter earnings surprise of 1.8%, on average.
The Zacks Consensus Estimate for Conagra Brands’ current financial-year sales and earnings suggests growth of 5.2% and 3.4%, respectively, from the corresponding year-ago reported figures.
McCormick, a manufacturer, marketer and distributor of spices, seasoning mixes and condiments, currently carries a Zacks Rank #2. MKC delivered an earnings surprise of 6.2% in the last reported quarter.
The Zacks Consensus Estimate for McCormick’s current financial-year sales suggests growth of 1.8% from the year-ago reported figure.