Sysco (SYY) Touches 52-Week High: More Room For Growth?

Sysco’s earnings surpassed the consensus mark, for the fourth straight quarter, in the third quarter of fiscal 2018. The company witnessed year-over-year growth in both the top and bottom lines. The primary reason behind strong results is its U.S. Foodservice Operations segment, wherein sales advanced 5.1% to $9,704.5 million on 2.6% growth in local case volume within U.S. Broadline operations, with total case volumes up 2.4%. Notably, local case volumes in this segment have been rising year over year for 16 consecutive quarters. Additionally, rising restaurant sales have been benefiting the company’s U.S. operations for a while now. Further, the company’s performance gained from lower taxes and favorable results in the international segment. Management expects these upsides to continue in the forthcoming periods as well.

Sysco has been actively pursuing strategic acquisitions to enhance its portfolio and expand its base. In this regard, the company closed its Kent Foods buyout during the fiscal third quarter and expects the same to bolster the U.K. and European business bandwagon. During the fiscal third quarter, the company also concluded the acquisitions pertaining to Hawaii-based HFM FoodService and Louisiana-based Doerle Food Service. Incidentally, the HFM buyout aided the company’s U.S. Broadline operations during the quarter. Sysco also remains on track with the integration process of London-based Brakes Group that was acquired in July 2016.

Apart from this, the company is likely to continue gaining from its recently highlighted three-year financial goals. These include enhancing consumers’ experience, optimizing business, stimulating power of its people and achieving operational efficacy. Progressing in this line, the company remains focused on enhancing assortments, making constant innovations, ensuring food safety and revitalizing brands. Further, to evolve with the changing consumer preferences, Sysco remains committed toward investing in technology and enhancing e-commerce operations. Moreover, it plans to improve supply chain, increase transparency, enhance deliveries and manage product costs effectively.

All said, management believes that the company is well placed to achieve adjusted operating income improvement in the higher end of its targeted range of $600-$650 million.