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Sysco (SYY) Benefits From Recipe for Growth Amid Cost Woes
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Sysco Corporation (SYY - Free Report) is on track with prudent buyouts to boost long-term growth. The company is focused on enhancing efficiency through supply-chain productivity and structural cost-containment efforts. It remains on track with its Recipe for Growth strategy. These upsides drove second-quarter fiscal 2024 results, with earnings and sales increasing year over year.
The extensive range of product offerings, together with the proficiency of Sysco’s sales team, strength of its supply chain and financial stability, position it well to achieve impressive outcomes. For fiscal 2024, management envisions sales to increase in mid-single digits to nearly $80 billion. Adjusted earnings per share are expected to rise 5-10% to the $4.20-$4.40 band in fiscal 2024.
Shares of the Zacks Rank #3 (Hold) company have increased 21.6% in the past six months compared with the industry’s 15.4% growth.
Let’s delve deeper.
Image Source: Zacks Investment Research
Buyouts: Major Driver
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 SYY.
Recipe for Growth
Sysco is focused on its Recipe for Growth, which includes enhancing customers’ experience via digital tools. It 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. It 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.
High Costs Hurt
Sysco has been encountering product cost inflation for a while now. In the second quarter of fiscal 2024, 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. Nevertheless, focusing on the upsides mentioned above are likely to offer respite amid high costs.
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 implies growth of 18.6% and 35.6%, respectively, from the year-ago reported numbers.
Utz Brands Inc. (UTZ - Free Report) , which manufactures a diverse portfolio of salty snacks, currently carries 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 implies growth of 17.5% from the year-ago reported numbers.
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Sysco (SYY) Benefits From Recipe for Growth Amid Cost Woes
Sysco Corporation (SYY - Free Report) is on track with prudent buyouts to boost long-term growth. The company is focused on enhancing efficiency through supply-chain productivity and structural cost-containment efforts. It remains on track with its Recipe for Growth strategy. These upsides drove second-quarter fiscal 2024 results, with earnings and sales increasing year over year.
The extensive range of product offerings, together with the proficiency of Sysco’s sales team, strength of its supply chain and financial stability, position it well to achieve impressive outcomes. For fiscal 2024, management envisions sales to increase in mid-single digits to nearly $80 billion. Adjusted earnings per share are expected to rise 5-10% to the $4.20-$4.40 band in fiscal 2024.
Shares of the Zacks Rank #3 (Hold) company have increased 21.6% in the past six months compared with the industry’s 15.4% growth.
Let’s delve deeper.
Image Source: Zacks Investment Research
Buyouts: Major Driver
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 SYY.
Recipe for Growth
Sysco is focused on its Recipe for Growth, which includes enhancing customers’ experience via digital tools. It 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. It 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.
High Costs Hurt
Sysco has been encountering product cost inflation for a while now. In the second quarter of fiscal 2024, 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. Nevertheless, focusing on the upsides mentioned above are likely to offer respite amid high costs.
Better-Ranked Staple Stocks
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 implies growth of 18.6% and 35.6%, respectively, from the year-ago reported numbers.
Utz Brands Inc. (UTZ - Free Report) , which manufactures a diverse portfolio of salty snacks, currently carries 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 implies growth of 17.5% from the year-ago reported numbers.