Global food products maker and distributor
) reported better-than-expected first-quarter fiscal 2013
adjusted earnings (excluding business transformation expenses and
one-time items) of 56 cents. Earnings beat the Zacks Consensus
Estimate of 48 cents by 16.7%, but declined from the prior-year
quarter earnings of 58 cents by 3.4% due to weak restaurant
traffic. The year-over-year results were also dampened by
sluggish macro-economic scenario and weather related headwinds,
which in turn led to lower consumer spending.
Quarter in Detail
Sysco's sales grew 5.7% on a year-over-year basis to $11.7
billion in the first quarter of fiscal 2013, driven by 3.0%
volume growth (including acquisitions). Acquisitions contributed
2.3% to sales growth, while currency translation decreased sales
by 0.5%. First-quarter sales beat the Zacks Consensus Estimate of
Gross profit improved marginally by 1.8% to $2.1 billion in
the quarter due to ongoing competitive pressure and shift in
customer mix. Gross margin declined 68 basis points (bps) to
17.63%. Adjusted operating income, declined 2.7% in the quarter
to $478.0 million due to higher adjusted operating expenses.
Other Financial Updates
Cash and cash equivalents were $359.5 million at the end of
Sep 28, 2013 compared with $412.3 million at the end of Jun 29,
2013. Long-term debt was $2.87 billion at the end of first
quarter compared with $2.64 billion at the end of the fourth
Sysco believes in growing through acquisitions since the
company operates in a highly fragmented industry. It intends to
achieve 0.5%-1% sales growth through acquisitions in the long
term. The acquisition environment is currently favorable and the
company has a number of acquisitions at various stages of
processing at the moment.
We appreciate the company's growth strategy 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 margins.
Sysco holds a Zacks Rank #4 (Sell). However, there are other
stocks in the retail and wholesale sector that are worth
considering. These include
reeHouse Foods Inc.
Pinnacle Foods Inc.
) all carrying a Zacks Rank #2 (Buy).
PINNACLE FOODS (PF): Free Stock Analysis
SMUCKER JM (SJM): Free Stock Analysis Report
SYSCO CORP (SYY): Free Stock Analysis Report
TREEHOUSE FOODS (THS): Free Stock Analysis
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