Global food products maker and distributor
) reported better-than-expected third quarter fiscal 2013
earnings. Adjusted earnings (excluding business transformation
expenses and one-time items) of 49 cents beat the Zacks Consensus
Estimate of 42 cents by 16.7%.
The adjusted earnings however lagged the prior-year quarter
earnings of 50 cents by 2.0%. The results were impacted by
sluggish macro-economic scenario and weather-related headwinds,
which in turn were reflected in lower consumer spending.
Quarter in Detail
Sysco's sales grew 4.0% on a year-over-year basis to $10.9
billion in the third quarter of fiscal 2013, driven by 1.7%
volume growth (including acquisitions). Acquisitions contributed
1.8% to sales growth, while currency translation decreased sales
by 0.1%. Third quarter sales missed the Zacks Consensus Estimate
of $11.1 billion.
Gross profit increased 2.1% to $1.9 billion, driven by strong
sales. Adjusted operating income however declined 4.4% in the
quarter to $470.5 million due to higher adjusted operating
Other Financial Updates
Cash and cash equivalents were $331.5 million at the end of
Mar 30, 2013 compared with $320.8 million at the end of Dec 29,
2012. Long-term debt was $2.56 billion at the end of third
quarter compared with $2.8 billion in the prior quarter.
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 in the
long term. The company has a number of acquisitions at various
stages of processing at the moment.
The acquisition environment is currently favorable and the
company has a number of potential opportunities in the pipeline.
To date in fiscal year 2013, the company has already acquired a
total of 9 companies, whose aggregate annual revenues are over
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 margins.
Sysco holds a Zacks Rank #4 (Sell). However, there are other
favorable stocks in the retail and wholesale sector that are
worth considering. These include
Green Mountain Coffee Roasters Inc
Sears Holding Corp
), all of them carrying a Zacks Rank #1 (Strong Buy).
GREEN MTN COFFE (GMCR): Free Stock Analysis
KROGER CO (KR): Free Stock Analysis Report
SEARS HLDG CP (SHLD): Free Stock Analysis
SYSCO CORP (SYY): Free Stock Analysis Report
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