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1. Company Snapshot

1.a. Company Description

Sysco Corporation, through its subsidiaries, engages in the marketing and distribution of various food and related products primarily to the foodservice or food-away-from-home industry in the United States, Canada, the United Kingdom, France, and internationally.It operates through U.S. Foodservice Operations, International Foodservice Operations, SYGMA, and Other segments.The company distributes frozen foods, such as meats, seafood, fully prepared entrées, fruits, vegetables, and desserts; canned and dry foods; fresh meats and seafood; dairy products; beverage products; imported specialties; and fresh produce.


It also supplies various non-food items, including paper products comprising disposable napkins, plates, and cups; tableware consisting of China and silverware; cookware, which include pots, pans, and utensils; restaurant and kitchen equipment and supplies; and cleaning supplies.The company serves restaurants, hospitals and nursing homes, schools and colleges, hotels and motels, industrial caterers, and other foodservice venues.As of August 27, 2021, it operated 343 distribution facilities.


Sysco Corporation was incorporated in 1969 and is headquartered in Houston, Texas.

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1.b. Last Insights on SYY

Sysco Corporation's recent performance has been driven by several positive factors. The company is poised for earnings growth, as indicated by Wall Street expectations, and has the right combination of key ingredients for a likely earnings beat in its upcoming report. Additionally, Sysco's margins have been pressured by mix shift and soft volume, but new sourcing deals and local growth may aid recovery. The company's strong balance sheet, reduced leverage, and ongoing share buybacks position it for continued dividend growth and capital returns. Furthermore, Sysco's improving sales force, expanding market, and international growth support a 7% EPS CAGR estimate and 12%+ total annual return outlook.

1.c. Company Highlights

2. Sysco's Strong Q1 FY '26 Earnings: A Closer Look

Sysco reported a robust financial performance in Q1 FY '26, with sales growth of 3.2% on a reported basis and 3.8% excluding the divestiture of Mexico. Gross profit grew 3.9% to $3.9 billion, with gross margin expansion of 13 basis points to 18.5%. Adjusted EPS came in at $1.15, beating estimates of $1.12, representing a 5.5% growth. Adjusted operating income grew to $898 million, and adjusted EBITDA was $1.1 billion, up 0.1% versus the prior year.

Publication Date: Oct -30

📋 Highlights
  • Strong Q1 Performance:: Exceeded financial plan with 3.2% reported sales growth and 3.8% growth excluding Mexico divestiture, outpacing industry traffic improvement by 60 basis points.
  • Gross Profit Expansion:: Achieved $3.9 billion in gross profit (+3.9%) with 13 bps margin expansion to 18.5%, driven by strategic sourcing and operational efficiency.
  • International Segment Outperformance:: Recorded 4.5% sales growth and 13.1% adjusted operating income growth, contributing to overall profit expansion.
  • AI Adoption & Productivity:: 90% of sales consultants use AI360, correlating with improved customer service and retention, while Perks 2.0 boosted supply chain service levels.
  • Confident FY26 Guidance:: Maintains 3-5% net sales growth and 1-3% adjusted EPS growth (5-7% excluding $100M incentive headwind), citing momentum in local and international markets.

Segment Performance

The U.S. Broadline local business inflected positive, with volume growth of 0.4%, outpacing the industry's 60 basis points traffic improvement. The International segment delivered outsized sales growth of 4.5% and adjusted operating income growth of 13.1%. The company's supply chain organization improved customer service levels, health and safety performance, and productivity, driven by initiatives like AI360 and Perks 2.0.

Growth Initiatives and Outlook

Sysco is confident in delivering its FY '26 guidance, driven by its stabilized colleague population, new sales professionals, and initiatives like AI360 and Perks 2.0. The company expects reported net sales growth of approximately 3% to 5% in FY '26, with adjusted EPS growth of 1% to 3%. Kenny Cheung, CFO, stated that they're confident in their ability to deliver at least 100 basis points of sequential improvement, driven by self-help initiatives, such as sales force growth and AI tools.

Valuation and Pricing

With a P/E Ratio of 19.61 and EV/EBITDA of 13.12, Sysco's valuation appears reasonable. The company's ROE of 92.63% and ROIC of 12.9% indicate strong profitability. Analysts estimate next year's revenue growth at 3.9%, which is in line with the company's guidance. The market seems to have priced in a moderate growth trajectory, and Sysco's strong Q1 earnings and guidance suggest that the company is on track to meet its targets.

Industry Trends and Competitive Advantage

The broader restaurant industry trends are mixed, with QSR and larger national chains underperforming, while independents are performing better. Sysco's focus on independent restaurants and its strong specialty business position it well to capitalize on these trends. Kevin Hourican noted that Sysco has taken market share every year for the past 6 years and intends to continue this trend, driven by its unique products, expert sales colleagues, and service model.

3. NewsRoom

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Sysco Corporation $SYY Shares Sold by Clarkston Capital Partners LLC

Nov -28

Source: defenseworld.net

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Sysco Corporation (NYSE:SYY) Receives Consensus Rating of “Moderate Buy” from Analysts

Nov -26

Source: defenseworld.net

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Associated Banc Corp Sells 1,210 Shares of Sysco Corporation $SYY

Nov -25

Source: defenseworld.net

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Arcadia Investment Management Corp MI Has $288,000 Stake in Sysco Corporation $SYY

Nov -15

Source: defenseworld.net

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Sysco Declares Quarterly Dividend Payment

Nov -12

Source: globenewswire.com

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Buy 3 Ideal Dividend Kings Of 24 'Safer' In November's 56

Nov -10

Source: seekingalpha.com

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Y Intercept Hong Kong Ltd Buys Shares of 18,104 Sysco Corporation $SYY

Nov -03

Source: defenseworld.net

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Sysco Corporation $SYY Shares Sold by Bessemer Group Inc.

Nov -03

Source: defenseworld.net

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (3.80%)

6. Segments

U.S. Foodservice Operations

Expected Growth: 3.5%

Sysco's U.S. Foodservice Operations growth of 3.5% is driven by increased demand for convenient food solutions, expanding customer base, and strategic acquisitions. The company's focus on digital transformation, logistics optimization, and customer relationship management also contribute to its growth. Additionally, the ongoing recovery in the foodservice industry post-pandemic supports Sysco's revenue expansion.

International Foodservice Operations

Expected Growth: 4.5%

Sysco's International Foodservice Operations growth of 4.5% is driven by expanding customer base, increasing demand for food distribution services, and strategic acquisitions. The company leverages its scale and expertise to capitalize on emerging markets, improve operational efficiency, and enhance its product offerings, resulting in steady growth and market share gains.

SYGMA

Expected Growth: 4.8%

SYGMA's 4.8% growth is driven by Sysco's strategic expansion into the European market, increasing customer base, and rising demand for customized food distribution services. The segment's growth is also attributed to operational efficiencies and effective integration of acquired businesses, leading to improved profitability and market share gains.

Other

Expected Growth: 2.8%

Sysco's 'Other' segment growth of 2.8% is driven by increased demand for specialty products, expanded customer relationships, and strategic acquisitions. The segment's performance is also influenced by price inflation and a recovering economy, leading to increased foodservice and hospitality industry sales.

7. Detailed Products

Food and Beverage Products

Sysco Corporation offers a wide range of food and beverage products, including fresh produce, meats, dairy products, canned and packaged goods, and specialty items such as organic and gourmet products.

SySysco's Guest Supply

Sysco's Guest Supply segment provides a range of guest supplies, including linens, toiletries, and amenities, to hotels, restaurants, and other food service providers.

Sysco's Uniforms and Footwear

Sysco's Uniforms and Footwear segment provides a range of uniforms, footwear, and accessories to food service providers, including restaurants, hotels, and healthcare facilities.

Sysco's Equipment and Supplies

Sysco's Equipment and Supplies segment provides a range of equipment and supplies, including kitchen equipment, tableware, and cleaning supplies, to food service providers.

Sysco's Specialty Products

Sysco's Specialty Products segment provides a range of specialty products, including ethnic and gourmet foods, organic and natural products, and specialty equipment.

8. Sysco Corporation's Porter Forces

Forces Ranking

Threat Of Substitutes

Sysco Corporation operates in the food distribution industry, where substitutes are limited. Customers rely on Sysco for a wide range of products and services, making it difficult for substitutes to emerge.

Bargaining Power Of Customers

Sysco's customers include restaurants, healthcare facilities, and other foodservice providers. While these customers have some bargaining power, Sysco's large market share and extensive product offerings give it a degree of pricing power.

Bargaining Power Of Suppliers

Sysco sources products from a large number of suppliers, which reduces the bargaining power of any one supplier. However, some suppliers may have significant negotiating power due to the uniqueness of their products.

Threat Of New Entrants

The food distribution industry has high barriers to entry, including significant capital requirements, complex logistics, and established relationships with suppliers and customers. This makes it difficult for new entrants to compete with Sysco.

Intensity Of Rivalry

The food distribution industry is highly competitive, with several large players competing for market share. Sysco faces intense rivalry from companies like US Foods and Gordon Food Service.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 87.44%
Debt Cost 6.15%
Equity Weight 12.56%
Equity Cost 8.35%
WACC 6.43%
Leverage 695.97%

11. Quality Control: Sysco Corporation passed 6 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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Altria

A-Score: 8.0/10

Value: 6.8

Growth: 5.8

Quality: 7.5

Yield: 10.0

Momentum: 8.5

Volatility: 9.7

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Sysco

A-Score: 6.4/10

Value: 4.3

Growth: 6.9

Quality: 4.2

Yield: 6.0

Momentum: 7.0

Volatility: 10.0

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Kraft Heinz

A-Score: 6.0/10

Value: 8.7

Growth: 3.8

Quality: 4.4

Yield: 9.0

Momentum: 1.0

Volatility: 9.0

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Walmart

A-Score: 5.5/10

Value: 2.4

Growth: 5.4

Quality: 4.8

Yield: 2.0

Momentum: 8.5

Volatility: 9.7

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Costco Wholesale

A-Score: 5.4/10

Value: 1.4

Growth: 7.0

Quality: 5.7

Yield: 2.0

Momentum: 6.0

Volatility: 10.0

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Andersons

A-Score: 4.7/10

Value: 6.4

Growth: 5.9

Quality: 4.1

Yield: 4.0

Momentum: 2.0

Volatility: 5.7

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

73.1$

Current Price

73.1$

Potential

-0.00%

Expected Cash-Flows