Sysco (SYY) Q3 Earnings Beat Estimates, Revenues Increase Y/Y

Sysco Corporation SYY came out with impressive third-quarter fiscal 2024 results, wherein the top and bottom lines grew year over year, and earnings surpassed the Zacks Consensus Estimate.

The company witnessed positive operating leverage for the sixth straight quarter, driven by a faster expansion in the gross profit compared to operating expenses. Management undertook proactive measures to address both variable and structural operating costs, leading to a raised cost-out goal for fiscal 2024. The company targets cost savings of $120 million now compared with the $100 million expected earlier.

Apart from this, management remains on track with a balanced capital allocation approach, emphasizing investments in the business while rewarding shareholders. This is also evident from the company’s recently unveiled dividend hike. For fiscal 2024, management continues to envision adjusted earnings per share or EPS growth of 5-10% to the $4.20-$4.40 band.

Quarter in Detail

Sysco’s adjusted earnings of 96 cents per share came a penny ahead of the Zacks Consensus Estimate of 95 cents. The bottom line rose 6.7% year over year.

Sysco Corporation Price, Consensus and EPS Surprise

Sysco Corporation Price, Consensus and EPS Surprise

Sysco Corporation price-consensus-eps-surprise-chart | Sysco Corporation Quote

The global food product maker and distributor reported sales of $19.4 billion, which jumped 2.7% year over year, though it fell short of the Zacks Consensus Estimate of $19.7 billion. Foreign exchange fluctuations positively impacted sales by 0.4%.

The adjusted gross profit jumped 5.2% to $3.6 billion, and the adjusted gross margin expanded 44 basis points (bps) to 18.6%. The upside was mainly driven by elevated volumes, efficient product cost inflation management and progress in the company’s strategic sourcing efforts.

SYY witnessed product cost inflation of 1.9%, measured by the estimated change in product costs, mainly in the meat and frozen categories.

Operating expenses rose 5.5% year over year due to cost inflation and higher volumes. Adjusted operating expenses advanced 4.3% year over year. The adjusted operating income of $799.3 million increased 8.4% from the year-ago period’s levels. The adjusted operating margin increased 22 bps to 4.1%.

Sysco’s adjusted EBITDA increased 8.5% to $976.6 million.

Segment Details

U.S. Foodservice Operations: In the reported quarter, sales rose 3.4% to $13.7 billion. Local case volumes within U.S. Foodservice grew 0.4%, while total case volumes within U.S. Foodservice increased 2.9%. Segment-adjusted operating income climbed 0.7% to $874.8 million. The segment’s performance was driven by increased volumes and effective margin management, which fueled profit enhancement.

International Foodservice Operations: The segment continued its growth record, with sales advancing 4.5% to $3.5 billion. Foreign exchange fluctuations positively impacted the segment’s sales by 2.1%. On a constant-currency (cc) basis, sales advanced 2.4%.  

SYGMA’s sales declined 3.5% to $1,903.9 million.

Meanwhile, the Other segment’s sales decreased 8.9% to $275.2 million.

Other Updates

Sysco ended the quarter with cash and cash equivalents of $598.3 million, long-term debt of $12,113.2 million and total shareholders’ equity of nearly $2,101 million.

For the first 39 weeks of fiscal 2024, the company generated cash flow from operations of $1.4 billion, and free cash flow amounted to $863.7 million. Capital expenditures, net of proceeds from sales of plant and equipment, amounted to $509.5 million.

During the 39-week period, Sysco returned $1.5 billion to shareholders through share buybacks worth $699.9 million and dividends of $758.1 million. For fiscal 2024, management remains on track to return nearly $2.25 billion to shareholders.

Shares of this Zacks Rank #3 (Hold) company have rallied 16.1% in the past six months compared with the industry’s 12.9% growth.

Some Better-Ranked Staple Bets

Here, we have highlighted three better-ranked stocks, namely Colgate-Palmolive CL, Vital Farms Inc. VITL and Vita Coco Company COCO.

Colgate-Palmolive, which manufactures and sells consumer products, currently carries a Zacks Rank #2 (Buy). CL delivered a positive earnings surprise of 4.4% in the trailing four quarters, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Colgate-Palmolive current fiscal-year sales and earnings suggests growth of 3.6% and nearly 11.7%, respectively, from the year-ago reported numbers.

Vital Farms offers a range of produced pasture-raised foods. It currently carries a Zacks Rank #2. VITL has a trailing four-quarter earnings surprise of 155.4%, on average.

The Zacks Consensus Estimate for Vital Farms’ current financial-year sales and earnings suggests growth of 15% and nearly 43.8%, respectively, from the year-ago reported numbers.

Vita Coco Company, which develops, markets and distributes coconut water products, currently carries a Zacks Rank #2. COCO has a trailing four-quarter earnings surprise of 31.3%, on average.

The Zacks Consensus Estimate for Vita Coco’s current financial-year sales and earnings suggests growth of 1.2% and 58.3%, respectively, from the year-ago reported numbers.

Zacks Names "Single Best Pick to Double"

From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.

It’s an American AI company that’s riding low right now, but it has rounded up clients like BMW, GE, Dell Computer, and Bosch. It has prospects for not just doubling but quadrupling in the year to come. Of course, all our picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.

Free: See Our Top Stock And 4 Runners Up

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Vita Coco Company, Inc. (COCO) : Free Stock Analysis Report

Colgate-Palmolive Company (CL) : Free Stock Analysis Report

Sysco Corporation (SYY) : Free Stock Analysis Report

Vital Farms, Inc. (VITL) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

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

More Related Articles

Info icon

This data feed is not available at this time.

Sign up for the TradeTalks newsletter to receive your weekly dose of trading news, trends and education. Delivered Wednesdays.