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Sysco (SYY) Q2 Earnings & Sales Miss Estimates, Increase Y/Y

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Sysco Corporation (SYY - Free Report) posted second-quarter fiscal 2023 results, wherein the top and bottom lines grew year over year but came below the respective Zacks Consensus Estimate. The company saw a double-digit rise in earnings and sales, continued market share gains and solid progress in the Recipe for Growth plan.

Management remains committed to surpassing customers’ expectations alongside managing costs. It expects to witness continued gains from the Recipe for Growth plan in the second half of the current fiscal year and into the next fiscal.

Quarter in Detail

Sysco’s adjusted earnings of 80 cents per share fell short of the Zacks Consensus Estimate of 83 cents. However, the bottom line rose 40.4% from the year-ago period’s earnings of 57 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 almost $18,594 million, which jumped 13.9% year over year while missing the Zacks Consensus Estimate of $18,733 million. Foreign currency had an adverse impact of 2.1% on the top line.

The gross profit jumped 15.9% to $3,349.6 million, and the gross margin expanded 29 basis points (bps) to 18%. This year-over-year growth in the gross profit was fueled by elevated volumes, efficient inflation management and progress in the company’s partnership growth management efforts.

SYY witnessed product cost inflation of 8.3%, which was measured by estimated changes in product costs, mainly in the dairy, frozen food and fresh produce categories. Foreign currency had a negative impact of 2.3% on the gross profit.

Adjusted operating expenses rose 11.4%. The adjusted operating income of $682.1 million grew by $186.4 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 13.7% to $13,077 million. Local case volumes within U.S. Broadline operations rose 3.2%, and total case volumes increased 5.2%. The gross profit escalated by 16.5% to $2,493.1 million, and the gross margin rose 45 bps to 19.06%.

International Foodservice Operations: The segment’s sales advanced 17% to $3,282.4 million in the quarter. However, foreign-exchange fluctuations adversely impacted the segment’s sales by 11.6%.

On a constant-currency (cc) basis, sales advanced 28.6%. The gross profit jumped 10.3% to $624.5 million, but the gross margin contracted 115 bps to 19.02%. At cc, the gross profit increased 22%, and the gross margin declined 104 bps. Currency movements hurt the segment’s gross profit by 11.7%.

SYGMA’s sales advanced 9.2% to $1,933.5 million. The gross profit rose 9.9% to $150.4 million, while the gross margin expanded 5 bps to 7.78%. Meanwhile, the Other segment’s sales jumped 23.1% to almost $301 million.

Other Updates

Sysco ended the quarter with cash and cash equivalents of $500.3 million, long-term debt of $10,349.9 million and total shareholders’ equity of $1,436.6 million. In the first 26 weeks of fiscal 2023, the company generated cash flow from operations of $503.5 million, and free cash flow amounted to $219.3 million.

During the first 26 weeks, Sysco returned $766 million to shareholders through share buybacks worth $267.7 million and dividends of $498.3 million. Shares of this Zacks Rank #4 (Sell) company have tumbled 7.2% in the past three months compared with the industry’s decline of 0.4%.

Solid Food Picks

Some better-ranked food stocks are Conagra Brands (CAG - Free Report) , Lamb Weston (LW - Free Report) and Post Holdings (POST - Free Report) .

Conagra, a consumer-packaged goods food company, currently sports a Zacks Rank #1 (Strong Buy). CAG has a trailing four-quarter earnings surprise of 8.9%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Conagra’s current fiscal-year sales and earnings suggests growth of 6.8% and 11.9%, respectively, from the corresponding year-ago reported figures.

Lamb Weston, which is a frozen potato product company, currently sports a Zacks Rank #1. LW has a trailing four-quarter earnings surprise of 52.6%, on average.

The Zacks Consensus Estimate for Lamb Weston’s current fiscal-year sales and EPS suggests an increase of 19.5% and 89.9%, respectively, from the year-ago reported number.

Post Holdings, which operates as a consumer-packaged goods company, currently sports a Zacks Rank #1. POST has a trailing four-quarter earnings surprise of 9.6%, on average.

The Zacks Consensus Estimate for Post Holdings’ current fiscal-year EPS suggests an increase of 70.8% from the year-ago reported number.


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