A month has gone by since the last earnings report for Sysco (SYY - Free Report) . Shares have added about 1.5% 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 the most recent earnings report in order to get a better handle on the important drivers.
Sysco Earnings Surpass Estimates in Q1, Improve Y/Y
Sysco Corporation reported first-quarter fiscal 2020 results. Adjusted earnings of 98 cents per share increased 8.6% year over year and surpassed the Zacks Consensus Estimate by a penny. The earnings performance was backed by improved adjusted operating income, which in turn gained from focus on driving local case volumes and solid cost management.
This global food products maker and distributor reported sales of $15,303 million, which inched up 0.6% year over year. However, the figure fell short of the Zacks Consensus Estimate of $15,535 million. This marked the company’s seventh straight quarter of top-line miss. Foreign exchange fluctuations hurt sales by 0.6% during the quarter.
Gross profit in the quarter improved 1.4% to $2,943.4 million, courtesy of higher sales. Further, gross margin expanded 15 basis points (bps) to 19.23%. Currency headwinds weighed on gross profit by 0.8%. Adjusted operating income rose 7.3% to $ $741.9 million, while adjusted operating margin improved 30 bps to 4.85%.
U.S. Foodservice Operations: During the quarter, segment sales advanced 2.5% to $10,658.6 million. Local case volumes within U.S. Broadline operations inched up 1.5% (including organic sales growth of 1.4%) and total case volumes rose 0.5% (wherein organic sales increased 0.4%). Gross profit grew 2.6% to $2,144.9 million, while gross margin expanded 2 bps to 20.12%.
Results were somewhat negatively impacted by food-cost inflation of nearly 2.9% in U.S. Broadline, particularly in categories like meat, poultry, dairy and produce. Adjusted operating expenses escalated 0.4% but the adjusted operating income rose 6.1% to $865.5 million.
International Foodservice Operations: Segment sales slipped 0.3% to roughly $2,912.4 million in the quarter. Foreign exchange fluctuations hurt segment sales by 3.3% during the quarter. On a constant-currency basis, sales grew 3%.
Adjusted gross profit rose 2.1% to $628.2 million, though gross margin fell 20 bps to 20.87%. Currency headwinds weighed on segment gross profit by 3.7%. Adjusted operating expenses declined 2.7%. Adjusted operating income grew 3.8% to $99 million. Operating income in the segment was affected by currency movements to the tune of 2.4%.
Sysco ended the quarter with cash and cash equivalents of $455.5 million, long-term debt of $8,637.7 million and total shareholders’ equity of $2,454.7 million.
During the first quarter, the company generated cash flow from operations of $171.6 million and incurred net capital expenditure of $170.8 million. Free cash flow amounted to $0.8 million.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month.
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 C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. Notably, Sysco has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.