Sysco Misses on Q3 Earnings & Rev - Analyst Blog
May 05 2014 - 1:00PM
Zacks
Global food products maker and distributor Sysco
Corporation (SYY) reported third-quarter fiscal 2014
adjusted earnings of 38 cents. Earnings lagged the Zacks Consensus
Estimate of 39 cents by 2.6% and declined from the prior-year
quarter earnings of 40 cents by 5.0% due to modest sales growth and
cost pressure. Sales were also dampened by a sluggish
macro-economic scenario and weather related headwinds, which in
turn led to lower consumer spending. However, March sales were
significantly stronger compared to January and February as improved
weather rebounded demand and locally-managed sales
strengthened.
Quarter in Detail
Sysco's sales grew 3.2% on a year-over-year basis to $11.277
billion in the third quarter of fiscal 2014, driven by 3.0% volume
growth (including acquisitions). Acquisitions contributed 0.8% to
sales growth, while currency translation decreased sales by 0.9%.
Third-quarter sales marginally lagged the Zacks Consensus Estimate
of $11.393 billion. Growth was weaker than 4.1% growth in the
second quarter and 5.7% growth in the first quarter owing to a
difficult consumer spending environment.
Gross profit improved 2.7% to $2.0 billion in the quarter, while
gross margin was flat at 17.7% due to ongoing cost pressure.
Adjusted operating income increased only 0.3% in the quarter to
$388.3 million due to a 3.3% increase in adjusted operating
expenses. Adjusted operating margin declined 10 basis points to
3.4% in the quarter.
Other Financial Updates
Cash and cash equivalents were $341.1 million at the end of Mar
29, 2014 compared with $449.9 million at the end of Dec 28, 2013.
Long-term debt was $2.99 billion at the end of the third quarter as
against $2.94 billion at the end of the second quarter.
Overall, we appreciate the company’s growth strategy and its
efforts to reduce costs and improve efficiency. However, we are
concerned about rising costs due to fuel price hikes and other
inputs, which hurt margins. Sysco holds a Zacks Rank #3 (Hold).
Other better-ranked food companies in the industry include
B&G Foods Inc (BGS), BRF-Brasil
Food (BRFS) and McCormick & Co. Inc.
(MKC). While B&G Foods and BRF sport a Zacks Rank#1 (Strong
Buy), McCormick holds a Zacks Rank #2 (Buy).
B&G FOODS CL-A (BGS): Free Stock Analysis Report
BRF-BRASIL FOOD (BRFS): Free Stock Analysis Report
MCCORMICK & CO (MKC): Free Stock Analysis Report
SYSCO CORP (SYY): Free Stock Analysis Report
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