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Sysco (SYY) Gains on Recipe for Growth & Strategic Acquisitions
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Sysco Corporation (SYY - Free Report) is focused on its Recipe for Growth, which is aimed at strengthening capacities across sales and supply chain. The company is undertaking prudent buyouts to boost growth. However, persistent cost inflation is a concern for Sysco.
Let’s discuss this in detail.
Recipe For Growth
Sysco is focused on its Recipe for Growth, which includes enhancing customers’ experience via digital tools. 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. In this regard, management is improving supply-chain performance on the back of undertaking operational excellence. In the second quarter of fiscal 2024, Sysco’s operating profit improved, driven by positive operating leverage, with gross profits growing at a faster rate than operating expenses.
SYY aims to provide customer-oriented merchandising and marketing solutions to augment sales. The company also targets team-based selling, with an emphasis on important cuisines. Management is also focused on cultivating new capacities, channels and segments, along with sponsoring investments via cost-saving initiatives.
Image Source: Zacks Investment Research
Acquisitions Fuel Growth
Sysco is on track with prudent buyouts to grow its distribution network and customer base. In the first quarter of fiscal 2024, Sysco closed the buyout of BIX Produce, which aids its specialty produce business (FreshPoint) to strengthen its geographical presence in unexplored areas and enhance its specialty produce offerings. In October 2023, the company unveiled that it inked a deal to acquire Edward Don & Company, which enhances Sysco’s distribution network and 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 Sysco.
Cost Woes: A Concern
Sysco has been encountering product cost inflation for a while now. In the fiscal second quarter, the company witnessed product cost inflation of 1.1%, measured by the estimated change in product costs, mainly in the meat and frozen categories. During the quarter, operating expenses rose 3.9% due to cost inflation and increased volumes. The persistence of cost escalations is a concern for profits.
The upsides mentioned above are likely to keep Sysco’s growth story going. Shares of the Zacks Rank #3 (Hold) company have increased 21.6% in the past six months compared with the industry’s 8.1% growth.
The Zacks Consensus Estimate for The Chef’s Warehouse’s current fiscal year sales and earnings suggests growth of 8.7% and 4.7%, respectively, from the year-ago reported numbers.
Vital Farms Inc. (VITL - Free Report) offers a range of produced pasture-raised foods. It currently carries a Zacks Rank #2. VITL has a trailing four-quarter average earnings surprise of 155.4%.
The Zacks Consensus Estimate for Vital Farms’ current financial-year sales and earnings suggests growth of 18.6% and 35.6%, respectively, from the year-ago reported numbers.
Utz Brands Inc. (UTZ - Free Report) manufactures a diverse portfolio of salty snacks, currently carrying a Zacks Rank #2. UTZ has a trailing four-quarter earnings surprise of 2.6% on average.
The Zacks Consensus Estimate for Utz Brands’ current financial-year earnings suggests growth of 15.8% from the year-ago reported numbers.
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Sysco (SYY) Gains on Recipe for Growth & Strategic Acquisitions
Sysco Corporation (SYY - Free Report) is focused on its Recipe for Growth, which is aimed at strengthening capacities across sales and supply chain. The company is undertaking prudent buyouts to boost growth. However, persistent cost inflation is a concern for Sysco.
Let’s discuss this in detail.
Recipe For Growth
Sysco is focused on its Recipe for Growth, which includes enhancing customers’ experience via digital tools. 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. In this regard, management is improving supply-chain performance on the back of undertaking operational excellence. In the second quarter of fiscal 2024, Sysco’s operating profit improved, driven by positive operating leverage, with gross profits growing at a faster rate than operating expenses.
SYY aims to provide customer-oriented merchandising and marketing solutions to augment sales. The company also targets team-based selling, with an emphasis on important cuisines. Management is also focused on cultivating new capacities, channels and segments, along with sponsoring investments via cost-saving initiatives.
Image Source: Zacks Investment Research
Acquisitions Fuel Growth
Sysco is on track with prudent buyouts to grow its distribution network and customer base. In the first quarter of fiscal 2024, Sysco closed the buyout of BIX Produce, which aids its specialty produce business (FreshPoint) to strengthen its geographical presence in unexplored areas and enhance its specialty produce offerings. In October 2023, the company unveiled that it inked a deal to acquire Edward Don & Company, which enhances Sysco’s distribution network and 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 Sysco.
Cost Woes: A Concern
Sysco has been encountering product cost inflation for a while now. In the fiscal second quarter, the company witnessed product cost inflation of 1.1%, measured by the estimated change in product costs, mainly in the meat and frozen categories. During the quarter, operating expenses rose 3.9% due to cost inflation and increased volumes. The persistence of cost escalations is a concern for profits.
The upsides mentioned above are likely to keep Sysco’s growth story going. Shares of the Zacks Rank #3 (Hold) company have increased 21.6% in the past six months compared with the industry’s 8.1% growth.
Solid Staple Bets
The Chef’s Warehouse (CHEF - Free Report) , which engages in the distribution of specialty food products, currently carries a Zacks Rank #2 (Buy). CHEF has a trailing four-quarter earnings surprise of 3.2%, on average. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
The Zacks Consensus Estimate for The Chef’s Warehouse’s current fiscal year sales and earnings suggests growth of 8.7% and 4.7%, respectively, from the year-ago reported numbers.
Vital Farms Inc. (VITL - Free Report) offers a range of produced pasture-raised foods. It currently carries a Zacks Rank #2. VITL has a trailing four-quarter average earnings surprise of 155.4%.
The Zacks Consensus Estimate for Vital Farms’ current financial-year sales and earnings suggests growth of 18.6% and 35.6%, respectively, from the year-ago reported numbers.
Utz Brands Inc. (UTZ - Free Report) manufactures a diverse portfolio of salty snacks, currently carrying a Zacks Rank #2. UTZ has a trailing four-quarter earnings surprise of 2.6% on average.
The Zacks Consensus Estimate for Utz Brands’ current financial-year earnings suggests growth of 15.8% from the year-ago reported numbers.