Sysco, the largest wholesale food distributor in America catering to restaurants, has announced better-than-expected quarterly earnings. This news has resulted in a positive trajectory for the company as its stock rose by 4.9% on Tuesday.
During its second fiscal quarter which ended in December, the Houston-based company reported sales of $19.3 billion. This amount represents a 3.7% increase from the previous year and falls in line with Wall Street’s predictions. A consensus was reached among 14 analysts polled by FactSet.
Sysco’s U.S. food service segment, which accounts for approximately 70% of the company’s revenue, experienced a 3.2% growth in sales, totaling $13.5 billion. Additionally, international sales soared by an impressive 9.6%, reaching $3.6 billion.
It is important to note that the sales growth was primarily driven by an increase in sales volume rather than higher prices. Notably, Sysco’s product costs only rose by 1.1% compared to the previous year, while the volume of goods sold in the U.S. increased by 3.4%.
This substantial rise in sales volume should reassure investors who may have had concerns about weakening demand for restaurant meals.
Furthermore, Sysco’s focus on higher sales volumes and effective management of product costs has led to improved profits for the company.
Gross profit for Sysco increased by 4.9%, amounting to $3.5 billion. Moreover, this growth rate surpassed its operating expenses for the fifth consecutive quarter. These results indicate that Sysco’s revenue generation strategies have successfully driven new income for the company.
Adjusted Net Income
The adjusted net income of Sysco, which excludes one-time items, reached $449 million for the reporting period. This translates to earnings per share of 89 cents, marking an impressive 11% increase compared to the previous year and surpassing analysts’ expectations by 1.6%.
Position of Strength
Sysco’s CEO, Kevin Hourican, expressed confidence in the company’s position of strength, highlighting its industry-leading profitability, size and scale advantages, as well as its strong balance sheet.
Growth Outlook
Looking ahead to fiscal 2024, which covers the 12 months ending in June, Sysco’s management foresees sales experiencing mid single-digit growth, reaching an impressive $80 billion. Adjusted earnings per share are expected to rise by 5% to 10%, with a projected range between $4.20 and $4.40.
Capital Return to Shareholders
During the first half of the fiscal year, Sysco returned approximately $706 million of capital to shareholders. This was achieved through $200 million of share repurchases and $506 million of dividends. Furthermore, the company plans to return a total of $2.25 billion to shareholders within the current fiscal year, indicating a significant increase from their previous projection. The revised plan now includes a buyback of $1.25 billion in stocks.
Balanced Capital Allocation
Sysco’s CFO, Kenny Cheung, emphasized the company’s balanced approach to capital allocation, which prioritizes investing in the business and rewarding shareholders. This strategy is based on their strong balance sheet and consistent cash generation.
