We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Here's Why You Should Give Sysco (SYY) Stock a Miss Now
Read MoreHide Full Article
Sysco Corporation (SYY - Free Report) has been bearing the brunt of tough macroeconomic trends, product cost inflation, rising operating costs and expenses, as well as foreign currency headwinds.
This currently Zacks Rank #4 (Sell) player has a market capitalization of $35.4 billion. In the past year, the stock has lost 14.9% compared with the industry’s 5% decline.
Image Source: Zacks Investment Research
Let’s discuss the factors that might continue to affect the firm’s near-term performance.
Soft Industry Trend: Sysco witnessed slower overall industry market volume growth in the fourth quarter of fiscal 2023. Although Sysco’s size and scale advantages and strong balance sheet position it for growth in fiscal 2024, the company expects the market to grow at a lower rate than fiscal 2023. This might put pressure on the company’s volumes, which, in turn, might affect sales.
Escalating Costs and Expenses: The company has been encountering product cost inflation in the U.S. Foodservice unit for a while now. For instance, in the third and fourth quarters of fiscal 2023, the company witnessed product cost inflation of 4.9% and 2.1%, respectively, measured by estimated changes in product costs, mainly in the frozen, canned and dry categories.
In fiscal 2023, its cost of sales and operating expenses recorded increases of 10.8% and 9%, respectively. Sysco expects its International segment to remain inflationary in fiscal 2024. Escalation in operating costs and expenses, if not controlled, might continue to affect SYY’s margins and profitability in the quarters ahead.
Currency Woes: Given its widespread presence in international markets, Sysco is exposed to unfavorable foreign currency movements. In the fiscal fourth quarter, the company’s International Foodservice operations contributed 18.5% of its total revenues. However, in the quarter, foreign exchange headwinds had an adverse impact of 0.2% and 0.1% on the overall top line and gross profit, respectively. A stronger U.S. dollar might further depress SYY's overseas business results in the quarters ahead.
High Tax Rate: For fiscal 2024, Sysco expects the tax rate to be approximately 24.5%, higher than 23% in fiscal 2023. A higher tax rate might hurt the company’s margins and profitability in fiscal 2024.
Southbound Estimate Trend: In the past 30 days, the Zacks Consensus Estimate for fiscal 2024 and fiscal 2025 earnings has been revised down by 3.4% and 3.3%, respectively.
The Zacks Consensus Estimate for Inter Parfums’ current financial-year sales indicates 19.7% growth from the year-ago reported figure. IPAR has a trailing four-quarter earnings surprise of 45.9% on average.
Helen of Troy (HELE - Free Report) , a provider of several consumer products, currently has a Zacks Rank #2 (Buy). HELE’s expected EPS growth rate for three to five years is 8%.
The Zacks Consensus Estimate for Helen of Troy’s current fiscal-year sales suggests a decline of 2.9% from the year-ago reported numbers. HELE has a trailing four-quarter earnings surprise of 8.1%, on average.
Ingredion Incorporated (INGR - Free Report) , a producer and distributor of sweeteners, nutrition ingredients and biomaterial solutions, currently carries a Zacks Rank #2.
The Zacks Consensus Estimate for INGR’s current financial-year earnings per share is expected to rise by 23.9% from the corresponding year-ago reported figure.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Here's Why You Should Give Sysco (SYY) Stock a Miss Now
Sysco Corporation (SYY - Free Report) has been bearing the brunt of tough macroeconomic trends, product cost inflation, rising operating costs and expenses, as well as foreign currency headwinds.
This currently Zacks Rank #4 (Sell) player has a market capitalization of $35.4 billion. In the past year, the stock has lost 14.9% compared with the industry’s 5% decline.
Image Source: Zacks Investment Research
Let’s discuss the factors that might continue to affect the firm’s near-term performance.
Soft Industry Trend: Sysco witnessed slower overall industry market volume growth in the fourth quarter of fiscal 2023. Although Sysco’s size and scale advantages and strong balance sheet position it for growth in fiscal 2024, the company expects the market to grow at a lower rate than fiscal 2023. This might put pressure on the company’s volumes, which, in turn, might affect sales.
Escalating Costs and Expenses: The company has been encountering product cost inflation in the U.S. Foodservice unit for a while now. For instance, in the third and fourth quarters of fiscal 2023, the company witnessed product cost inflation of 4.9% and 2.1%, respectively, measured by estimated changes in product costs, mainly in the frozen, canned and dry categories.
In fiscal 2023, its cost of sales and operating expenses recorded increases of 10.8% and 9%, respectively. Sysco expects its International segment to remain inflationary in fiscal 2024. Escalation in operating costs and expenses, if not controlled, might continue to affect SYY’s margins and profitability in the quarters ahead.
Currency Woes: Given its widespread presence in international markets, Sysco is exposed to unfavorable foreign currency movements. In the fiscal fourth quarter, the company’s International Foodservice operations contributed 18.5% of its total revenues. However, in the quarter, foreign exchange headwinds had an adverse impact of 0.2% and 0.1% on the overall top line and gross profit, respectively. A stronger U.S. dollar might further depress SYY's overseas business results in the quarters ahead.
High Tax Rate: For fiscal 2024, Sysco expects the tax rate to be approximately 24.5%, higher than 23% in fiscal 2023. A higher tax rate might hurt the company’s margins and profitability in fiscal 2024.
Southbound Estimate Trend: In the past 30 days, the Zacks Consensus Estimate for fiscal 2024 and fiscal 2025 earnings has been revised down by 3.4% and 3.3%, respectively.
Some Solid Staple Bets
Inter Parfums (IPAR - Free Report) , which manufactures, markets and distributes a range of fragrances and fragrance-related products, currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Inter Parfums’ current financial-year sales indicates 19.7% growth from the year-ago reported figure. IPAR has a trailing four-quarter earnings surprise of 45.9% on average.
Helen of Troy (HELE - Free Report) , a provider of several consumer products, currently has a Zacks Rank #2 (Buy). HELE’s expected EPS growth rate for three to five years is 8%.
The Zacks Consensus Estimate for Helen of Troy’s current fiscal-year sales suggests a decline of 2.9% from the year-ago reported numbers. HELE has a trailing four-quarter earnings surprise of 8.1%, on average.
Ingredion Incorporated (INGR - Free Report) , a producer and distributor of sweeteners, nutrition ingredients and biomaterial solutions, currently carries a Zacks Rank #2.
The Zacks Consensus Estimate for INGR’s current financial-year earnings per share is expected to rise by 23.9% from the corresponding year-ago reported figure.