Sysco (SYY) Q4 Earnings Surpass Estimates, Revenues Miss

Sysco Corporation (NYSE:SYY) reported fourth-quarter fiscal 2019 results, with the top and the bottom lines rising year over year. Earnings beat the Zacks Consensus Estimate, while sales missed the same.

Quarter in Detail

Adjusted earnings of $1.10 per share increased nearly 16.9% year over year and surpassed the Zacks Consensus Estimate of $1.07. The earnings performance was backed by improved sales and margins.

This global food products maker and distributor’s sales of $15,475 million inched up 1% year over year. However, the figure fell short of the Zacks Consensus Estimate of $15,556 million. This marked the company’s sixth straight quarter of top-line miss.

Sysco Corporation Price, Consensus and EPS Surprise

Gross profit in the fourth quarter improved 2.1% to $2,979 million, courtesy of higher sales. Further, gross margin expanded 21 basis points (bps) to 19.25%. Adjusted operating income rose 6.6% to $ $818.1 million, while adjusted operating margin improved 28 bps to 5.29%.

Segment Details

U.S. Foodservice Operations: During the fourth quarter, segment sales advanced 2.8% to $10,696 million. Local case volumes within U.S. Broadline operations inched up 1.4% (including organic sales growth of 1.3%) and total case volumes rose 0.4% (wherein organic sales increased 0.3%). Gross profit grew 2.9% to $2,148 million, while gross margin rose 3 bps to 20.1%.

Results were somewhat negatively impacted by food-cost inflation of nearly 2.5% in U.S. Broadline, particularly in categories like meat, poultry and produce. Adjusted operating expenses escalated 4.9% on account of higher supply-chain and labor costs across warehouse and transportation. Nevertheless, adjusted operating income inched up about 0.1% to $871.4 million.

International Foodservice Operations: Segment sales slipped 0.8% to roughly $2,924 million in the quarter. Foreign exchange fluctuations hurt sales by 0.8% during the quarter. Gross profit dipped 2.7% to $621.6 million, while gross margin fell 42 bps to 21.3%. Adjusted operating expenses declined 6.3%, courtesy of efficient expense management and regionalization initiatives. This was partially countered by integration costs. Adjusted operating income rallied 16.2% to $118.1 million. Operating income in the segment was affected by currency movements to the tune of about 0.6%.

Other Updates

Sysco ended the quarter with cash and cash equivalents of $513.4 million, long-term debt of $8,122 million and total shareholders’ equity of $2,503 million.

During fiscal 2019, the company generated cash flow from operations of $2,411 million and incurred net capital expenditure of $671.5 million. Free cash flow during the same period amounted to $1.7 billion.

Price Performance

This Zacks Rank #3 (Hold) stock has gained close to 4.6% in the past six months compared with the industry’s growth of 2.8%

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Kimberly-Clark (NYSE:KMB) , with an expected long-term earnings growth rate of 5.5%, also carries a Zacks Rank #2.

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