Sysco Corporation (SYY Quick QuoteSYY - Free Report) delivered second-quarter fiscal 2026 results, wherein both top and bottom lines increased year over year, and earnings beat the Zacks Consensus Estimate. Results reflected improving volume trends and margin expansion during the quarter. The company’s bottom line surpassed expectations, supported by positive local case growth within U.S. Foodservice operations and continued growth in international markets.

A Closer Look at SYY’s Q2 Results

Sysco’s adjusted earnings of 99 cents per share surpassed the Zacks Consensus Estimate of 98 cents. This figure increased 6.5% year over year, reflecting continued momentum in the company’s core business.

The global food product maker and distributor reported sales of $20.8 billion, which moved up 3% year over year, and came almost in line with the Zacks Consensus Estimate of $20.81 billion. 
Foreign exchange movements boosted the company’s sales by 0.7%. Excluding the impacts of the divested Mexico joint venture, Sysco’s sales grew 3.5%.

Sysco’s gross profit rose 3.9% to $3.8 billion, while the gross margin improved by 15 basis points to 18.3%. At the enterprise level, product cost inflation stood at 2.9% due to higher costs in the meat and seafood categories. The gross profit growth mainly reflected pricing actions and sourcing initiatives that helped offset product cost inflation. Foreign exchange movements boosted SYY’s gross profit by 0.9%.

The company’s operating expenses rose 5.5% year over year to $3.1 billion due to investments in business capacity and sales headcount. Adjusted operating expenses increased 4.1% to $3 billion.

Operating income slipped 2.8% to $692 million, while adjusted operating income inched up 3.1% to $807 million. We note that the adjusted operating margin was almost in line with the year-ago period’s level at 3.9%. SYY’s adjusted EBITDA came in at $1 billion, up 3.3% year over year.

SYY Provides Insights by Segments

U.S. Foodservice Operations: This segment continued to show improvement in local volume trends. Segment sales increased 2.4% year over year to $14.4 billion. Total case volume rose 0.8%, while local case volume improved 1.2%.

Gross profit rose 2.5% to $2.7 billion, with gross margin inching up 1 basis point to 18.9%. However, higher operating expenses related to growth initiatives resulted in adjusted operating income slipping 0.8% to $852 million.

International Foodservice Operations: The international segment delivered another strong quarter, driven by solid local volume growth, margin expansion and pricing actions. Sales increased 7.3% year over year to $4 billion. On a constant-currency basis, sales grew 3.6%, while excluding the divested Mexico joint venture, growth reached 9.9%.

Gross profit climbed 9.5% to $832 million, with gross margin expanding 42 basis points to 20.8%. Adjusted operating income surged 25.6% to $162 million, reflecting continued operating leverage and favorable pricing dynamics.

SYGMA: Segment sales edged up 0.5% year over year to $2.1 billion, while operating income improved 10.5%, supported by expense controls.

Meanwhile, the Other segment’s sales declined 3.4% year over year to $254 million, although operating income improved modestly.

Sysco’s Financial Health Snapshot

This Zacks Rank #3 (Hold) company exited the quarter with $1.2 billion in cash and cash equivalents and total liquidity of $2.9 billion. During the first half of fiscal 2026, the company generated $611 million in operating cash flow and $413 million in free cash flow.

Capital expenditures totaled $198 million for the first 26 weeks of fiscal 2026. Sysco returned $518 million to shareholders through dividends during the same period, underscoring its commitment to shareholder returns while maintaining balance sheet flexibility.

SYY’s FY26 Outlook

Management now expects adjusted earnings per share to come in at the high end of its previously issued guidance range of $4.50-$4.60 for fiscal 2026.

The outlook includes an approximate $100 million (16 cents per share) adverse effect from incentive compensation comparisons. Excluding this impact, adjusted EPS growth is projected at the upper end of the 5-7% range, aligning with Sysco’s long-term growth algorithm.

SYY shares have dropped 5.9% in the past six months compared with the industry’s decline of 16.1%.

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