The following is an excerpt from Ben Levisohn | November 7, 2016 | Barrons.com |
Shares of Sysco (SYY) soaring today after the food distributor beat earnings forecasts. Edward Jones analyst Jack Russo offers his take:
First-quarter adjusted earnings per share were $0.67, excluding one-time items, and up over 20% from one year ago, helped a lot by the recent U.K. acquisition of Brakes. This was above the consensus forecast. Helping results were higher case volumes (+2%), reasonable diesel and gas prices, good cost control by the company, and of course layering in the newly acquired U.K. operations. SYSCO overcame domestically weaker sales trends of late from the larger restaurant companies. Restaurants overall represent two-thirds of the company’s customer base. Competition remained fierce in the food-service distribution industry caused more recently by US Foods getting back in the game and trying to grow its business after the failed merger with SYSCO. Case unit volumes grew a respectable 2%, and SYSCO discounted somewhat to achieve that. Adjusted operating profits were up over 20% year-over-year. Slight food cost deflation was evident in the quarter as the dairy, meat and poultry categories deflated this figure. The company has benefited, too, from its accelerated share buyback of $1.5 billion as a way to put to use the company’s solid capital position.
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