Back to top

Image: Bigstock

Sysco (SYY) Shows Promise Courtesy of Recipe for Growth Program

Read MoreHide Full Article

Sysco Corporation (SYY - Free Report) appears to be in robust shape. The company has been gaining from its focus on enhancing efficiency through supply-chain productivity and structural cost-containment efforts. This distributor of food products has been on track with its Recipe for Growth strategy, which has been yielding favorable results.

These upsides were witnessed in the first quarter of fiscal 2024, wherein the top and bottom lines increased year over year and earnings beat the Zacks Consensus Estimate. Results were aided by higher volumes, robust margin management and efficient productivity enhancements.

Factors Telling SYY’s Growth Tale

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 likely to be a growth area in the coming years.

Zacks Investment Research
Image Source: Zacks Investment Research

The company’s Recipe for Growth program is strengthening its capacities across sales and supply chain. The program involves five strategic priorities aimed at enabling the company to grow 1.5 times faster than the market by FY24 end.

These 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, the company is focused on improving the supply chain to cater to customers efficiently and consistently on the back of better delivery and omnichannel inventory management. 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, the company is focused on cultivating new capacities, channels and segments, along with sponsoring investments via cost-saving initiatives.

SYY has long been carrying out various acquisitions over the years to grow its distribution network and customer base and boost long-term growth. In October 2023, the company unveiled that it inked a deal to acquire Edward Don & Company, which will enhance Sysco’s distribution network and offerings. In the first quarter of fiscal 2024, Sysco closed the buyout of BIX Produce, which will help its specialty produce business (FreshPoint) to strengthen its geographical presence in unexplored areas and enhance its specialty produce offerings.

In February 2022, the company concluded the acquisition of The Coastal Companies, which operates under Sysco’s FreshPoint business. The fast-growing and high-margin specialty space is a priority for SYY. Also, the company 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.

Wrapping Up

The extensive range of product offerings in both general and specialized categories, together with the proficiency of Sysco’s sales team, the strength of its supply chain and financial stability, positions it well to achieve impressive outcomes in the short run and even more robust results in the long run. For fiscal 2024, this Zacks Rank #2 (Buy) company envisions sales to increase in the mid-single digits to roughly $80 billion. Adjusted earnings per share are expected to grow 5-10% to the $4.20-$4.40 band.

Shares of SYY have gained 0.5% in the past three months against the industry’s decline of 5.1%.

3 Other Appetizing Bets

Lamb Weston (LW - Free Report) , which offers frozen potato products, sports a Zacks Rank #1 (Strong Buy) at present. LW has a trailing four-quarter earnings surprise of 46.2%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Lamb Weston’s current financial-year sales and earnings suggests growth of 28.3% and 24.8%, respectively, from the year-ago reported numbers.

The Kraft Heinz Company (KHC - Free Report) , a food and beverage product company, currently carries a Zacks Rank #2. KHC has a trailing four-quarter earnings surprise of 9.9%, on average.

The Zacks Consensus Estimate for Kraft Heinz’s current fiscal-year sales suggests growth of 1.2% from the corresponding year-ago reported figure.

Post Holdings (POST - Free Report) , operating as a cosmetic and skin care products provider, currently carries a Zacks Rank of 2. POST has a trailing four-quarter earnings surprise of 59.2%, on average.

The Zacks Consensus Estimate for Post Holdings’ current financial-year sales suggests growth of 10.9% from the prior-year reported number.

Published in