Global food products maker and distributor
) reported better-than-expected second quarter fiscal 2013
earnings. Adjusted earnings (excluding business transformation
expenses and restructuring charges) of 49 cents, beat the Zacks
Consensus Estimate of 41 cents by 19.5%.
The adjusted earnings also exceeded the prior-year quarter
earnings of 47 cents by 4.3%. The upswing in the results was
driven by solid top-line growth, gains from acquisitions, prudent
expense management and moderating input cost environment.
Quarter in Detail
Sysco's sales grew 5.4% on a year-over-year basis to $10.8
billion in the second quarter of fiscal 2013, driven by 2.8%
volume growth (including acquisitions). Acquisitions contributed
1.1% to sales growth, while currency translation increased sales
by 0.3%. Second quarter sales also beat the Zacks Consensus
Estimate of $10.7 billion.
Gross profit increased 3.9% to $1.9 billion, driven by strong
sales. Adjusted operating income increased 4.6% in the quarter to
$485.7 million, despite higher adjusted operating expenses.
Sysco completed the acquisition of four independent
foodservice companies in Dec 2012, whose combined aggregate
annual revenues amounted to $520 million in fiscal 2012. These
companies are as follows:
- Appert's Foodservice in St. Cloud, Minnesota
- Buchy Food Service, in Greenville, Ohio
- Central Seafood Company, in Orlando, Florida
- Distagro, the foodservice division of Montreal,
Quebec-based grocery retailer, Metro Richelieu Inc.
Sysco believes in growing through acquisitions, since the
company operates in a highly fragmented industry. It intends to
achieve sales growth of 0.5% to 1% through acquisitions over the
long term. To date in fiscal year 2013, the company has already
acquired a total of 9 companies, whose aggregate annual revenue
is over $750 million.
Other Financial Updates
Cash and cash equivalents were $320.8 million at the end of
Dec 29, 2013 compared with $548.4 million at the end of Sep 29,
2012. Long-term debt was flat at $2.8 billion in the quarter as
compared with the prior quarter.
Sysco holds a Zacks Rank #3 (Hold).We appreciate the company's
strategy of growth through acquisitions and its efforts to reduce
costs and improve efficiency. However, we are concerned about
rising costs due to fuel price hikes and other inputs, which hurt
Other stocks in the food industry worth considering are
Green Mountain Coffee Roasters, Inc
) carrying a Zacks Rank #1 (Strong Buy) and
), both holding a Zacks Rank #2 (Buy).
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