A month has gone by since the last earnings report for Sysco (SYY Quick QuoteSYY - Free Report) . Shares have added about 13.9% 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 catalysts.

Sysco's Earnings Miss Estimates in Q3, Sales Down

Sysco reported third-quarter fiscal 2020 results, with the top and the bottom lines declining year over year. Further, earnings missed the Zacks Consensus Estimate, while sales beat the same. Adjusted earnings of 45 cents per share fell 43% year over year and lagged the Zacks Consensus Estimate of 53 cents. The year-over-year upside can be attributed to reduced sales and margins.

This global food products maker and distributor reported sales of $13,699 million, which declined 6.5% year over year thanks to the coronavirus outbreak. Nevertheless, the figure surpassed the Zacks Consensus Estimate of $13,606 million. Foreign currency headwinds had an adverse impact of about 0.2% on the top line.

Gross profit in the quarter declined 6.9% to $2,564.2 million, owing to the coronavirus pandemic. Further, gross margin contracted 7 basis points (bps) to 18.72%. Foreign currency headwinds had an adverse impact of about 0.3% on the gross profit.

Adjusted operating income fell 39.2% to $377 million, while adjusted operating margin contracted 148 bps to 2.75%.

Segment Details

U.S. Foodservice Operations: During the quarter, segment sales declined 5.1% to $9,587 million. Local case volumes within U.S. Broadline operations fell 4.1% (including organic sales decline of 5.2%) and total case volumes dropped 5.2% (wherein organic sales declined 5.8%). Gross profit rose 5.7% to $1,895.4 million, while gross margin contracted 11 bps to 19.8%.

Results were negatively impacted by food-cost inflation of 1.3% in U.S. Broadline, particularly in categories like meat and dairy. Adjusted operating expenses increased 1.4% while the adjusted operating income declined 17.1% to $636.7 million.

International Foodservice Operations: Segment sales declined 9% to $2,508.6 million in the quarter. Foreign exchange fluctuations hurt segment sales by 1.3% during the quarter. On a constant-currency (cc) basis, sales fell 7.8%.

At cc, gross profit declined 10% to $508.5 million and gross margin fell 50 bps to 19.99%.  Currency headwinds put pressure on the segment’s gross profit by 1.3%.

Adjusted operating expense declined 2.2% and the adjusted operating income decreased 91.4% to $5 million. Operating income in the segment was positively impacted by currency movements to the tune of 2.1%. At cc, adjusted operating income declined 93.5% to $3.8 million.

Other Updates

Sysco ended the quarter with cash and cash equivalents of $2,240.8million, long-term debt of $10,023.3 million and total shareholders’ equity of $2,028.9 million.

During 39-Week ended Mar 28, the company generated cash flow from operations of $1,078.5 million and incurred net capital expenditures of $224.1 million. Free cash flow amounted to $487.8 million.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision flatlined during the past month. The consensus estimate has shifted -44.29% due to these changes.

VGM Scores

Currently, Sysco has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% 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.

Outlook

Sysco has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.