It has been about a month since the last earnings report for Sysco (SYY Quick QuoteSYY - Free Report) . Shares have added about 9.2% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Sysco due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Sysco Q1 Earnings Top Estimates, Volume Gains a Driver

Sysco posted first-quarter fiscal 2024 results. For fiscal 2024, the company envisions sales to increase in the mid-single digits to roughly $80 billion. Adjusted earnings per share or EPS are expected to grow 5-10% to the $4.20-$4.40 band.

Sysco’s adjusted earnings of $1.07 per share surpassed the Zacks Consensus Estimate of $1.02. The bottom line rose 10.3% from the year-ago period figure. The company reported sales of $19,620.5 million, which jumped 2.6% year over year, though it fell short of the Zacks Consensus Estimate of $19,695 million. Foreign currency had a positive impact of 0.6% on the top line.

The gross profit jumped 4.6% to $3,647.8 million, and the gross margin expanded 35 basis points (bps) to 18.6%. This year-over-year growth in the gross profit was mainly driven by elevated volumes, efficient product cost inflation management and progress in the company’s strategic sourcing efforts.

Sysco witnessed product cost inflation of 1.7%, measured by the estimated change in product costs, mainly in the frozen and canned and dry categories.

Operating expenses rose 3.3% year over year due to cost inflation and increased volumes. These were somewhat offset by greater productivity. Adjusted operating expenses grew 2.9% year over year. The adjusted operating income of $854.3 million grew 10.6% from the year-ago period, and the adjusted operating margin increased 31 bps to 4.4%.

U.S. Foodservice Operations: In the reported quarter, sales jumped 0.9% to $13,723.8 million compared with the consensus mark of $13,807 million. Local case volumes within U.S. Foodservice inched down 0.1%, while total case volumes within U.S. Foodservice increased 1.6%.

International Foodservice Operations: The segment’s sales advanced 12.2% to $3,683.2 million in the quarter compared with the Zacks Consensus Estimate of $3,822 million. Foreign exchange fluctuations positively impacted the segment’s sales by 3.2%. On a constant-currency (cc) basis, sales advanced 9%.  

SYGMA’s sales declined 1.4% to $1,906 million. Meanwhile, the Other segment’s sales rose 0.1% to $307.4 million.

Other Updates & Guidance

Sysco ended the quarter with cash and cash equivalents of $569.1 million, long-term debt of almost $10,703.9 million and total shareholders’ equity of $2,125.8 million. For the first 13 weeks of fiscal 2024, the company generated cash flow from operations of $87.2 million, and free cash flow amounted to negative $73.2 million.

During the quarter, Sysco returned $352.9 million to shareholders through share buybacks worth $100 million and dividends of $252.9 million.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month.

VGM Scores

Currently, Sysco has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top quintile 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 upward for the stock, and the magnitude of these revisions looks promising. Notably, Sysco has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.