Is Sysco Heading in the Right Direction?

With shares of Sysco Corporation (NYSE:SYY) trading at around $31.22, is SYY an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

C = Catalyst for the Stock’s Movement

Sysco is in the process of a heavy turnaround, which makes the potential for the company more difficult to determine. Let’s start with the basics. Q2 profit was down 11.6 percent, which related to turnaround costs. It should also be noted Sysco has been dealing with weaker sales and higher food costs for several years. However, this pertains to the entire industry. Sysco has fought back by cutting costs, reducing its employee count, and closing facilities. So far, those actions have had a small impact.

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Getting back to Q2, EPS came in at $0.38 versus $0.43 for the same quarter last year. Revenue came in at $10.8 billion, which beat the average expectation of $10.7 billion. This was also a 5.6 percent increase year-over-year as well as the highest Q2 revenue on record for the company. The primary reason for this record revenue was sales through acquisitions. This is great news, but expenses were up 8.2 percent to $116 million. The biggest expense was $45 million in restructuring costs. Another large expense was a $17 million rise in payroll expenses.

Let’s look at some important numbers prior to forming an opinion on this stock…

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