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Expenses Weigh On Sysco's Bottom Line

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Food distributorSysco ( SYY ) continues to grow its top line, but its bottom-line growth remains challenged.

In the past six quarters, sales grew 3% to 6%. The firm has posted 16 straight quarters of single-digit revenue growth. But earnings were flat to down 20% in the latest six periods, hurt by a higher delivery and other corporate expenses. Costs related to its proposed merger and integration with privately held US Foods have also weighed on earnings.

As announced in December, Sysco agreed to buy its smaller rival for $3 billion in stock and $500 million in cash. The company will also assume US Foods' debt of about $4.7 billion. Upon completion, the companies are expected to realize at least $600 million in annual synergies. The combined company is expected to have annual sales of about $65 billion.

The deal is still under antitrust review by the Federal Trade Commission. Sysco expects the business combination to be completed late in the third quarter or during the fourth quarter of this calendar year. Sysco's fiscal year ends in June. Analysts polled by Thomson Reuters see flat earnings in fiscal 2015, but growth of 7% is expected in fiscal '16.

Sysco is a S&P 500 Dividend Aristocrat, meaning that it's a S&P 500 company that has increased its dividend for at least 25 straight years. Houston-based Sysco has been paying shareholders quarterly dividends since 1970 and has sweetened its dividend for 45 straight years.

The company last hiked its dividend in November to the current rate of 29 cents a share from 28 cents. On an annual basis, it pays $1.16 a share. It has a yield of about 3.1%, which is the highest among the four dividend-paying companies in the Wholesale-Food industry group.

Sysco's stock has been in consolidation mode since surging on the merger announcement Dec. 9. It recently bounced back from a brief dip below its 40-week line.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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