It has been about a month since the last earnings report for Sysco (SYY Quick QuoteSYY - Free Report) . Shares have lost about 7.1% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Sysco due for a breakout? 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 catalysts.

Sysco's Q3 Earnings Lag Estimates, Sales Advance Y/Y

Sysco posted third-quarter fiscal 2023 results, wherein the top and bottom lines grew year over year and the former beat the Zacks Consensus Estimate. The company saw a double-digit rise in earnings and sales, continued market share gains, solid progress in the Recipe for Growth plan and supply-chain efficiency.

Sysco’s adjusted earnings of 90 cents per share fell short of the Zacks Consensus Estimate of 92 cents. However, the bottom line rose 26.8% from the year-ago period figure.

The company reported sales of $18,875.7 million, which jumped 11.7% year over year and cruised past the Zacks Consensus Estimate of $18,725 million. Foreign currency had an adverse impact of 1.2% on the top line.

The adjusted gross profit jumped 12.8% to $3,431.4 million, and the adjusted gross margin expanded 18 basis points (bps) to 18.2%. 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.

Sysco witnessed product cost inflation of 4.9%, which was measured by estimated changes in product costs, mainly in the dairy and frozen categories. Foreign currency had a negative impact of 1.3% on the gross profit. Adjusted operating expenses rose 9.3%. The adjusted operating income of $735.5 million grew 27.8% from the year-ago period.

U.S. Foodservice Operations: In the reported quarter, the segment witnessed robust sales and volume growth, overall share gains and higher profitability. Sales jumped 10.4% to $13,257.5 million. Local case volumes within U.S. Broadline operations rose 4.2%, and total case volumes increased 6.1%.

International Foodservice Operations: The segment’s sales advanced 18% to $3,344.1 million in the quarter. However, foreign-exchange fluctuations adversely impacted the segment’s sales by 7.3%. On a constant-currency (cc) basis, sales advanced 25.3%.  

SYGMA’s sales advanced 9.9% to $1,972.1 million. Meanwhile, the Other segment’s sales jumped 13.1% to almost $302 million.

Other Updates

Sysco ended the quarter with cash and cash equivalents of $757.9 million, long-term debt of $10,258.3 million and total shareholders’ equity of $1,575.3 million. In the first 39 weeks of fiscal 2023, the company generated cash flow from operations of $1,425.8 million, and free cash flow amounted to $979.6 million.

During the first 39 weeks, Sysco returned $1.1 billion to shareholders through share buybacks worth $377.8 million and dividends of $747.4 million.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month.

VGM Scores

Currently, Sysco has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, 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 A. 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. It's no surprise Sysco has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.