Sysco Delivers Mixed Second Quarter Results, Hit by High Operating Expenses

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Sysco Corp. (SYY) provided mixed results for the second quarter of fiscal 2022. Revenue beat consensus estimates, but earnings beat expectations due to higher-than-expected operating expenses. Shares of SYY rose 1.78% to close at $81.34 on Feb. 8.

Sysco is an American company that markets and distributes a range of food and related products. It operates through the United States Restaurant Operations, International Restaurant Operations, SYGMA and Other segments.

Sysco Benefits

Second-quarter sales rose 41.2% year-on-year to $16.3 billion, beating consensus estimates of $16.05 billion. According to CEO and President Kevin Hourican, the company has gained significant market share thanks to its strong supply chain and recipe for growth strategy.

Although diluted earnings per share rose 235.3% year over year to $0.57, it was still below consensus estimates of $0.71 per share. The misfire was fueled by adjusted operating expenses which rose 33.7% year-over-year to $367 million.

According to Chief Financial Officer Aaron Alt, the second quarter results reflect strong sales growth and increased profitability in a challenging business environment and inflationary pressures.

During the quarter, Sysco repurchased $416 million of common stock. The company also refinanced approximately $1.25 billion in debt at longer maturities. Sysco’s dividends have increased over the past 13 years, leading to a dividend yield of 2.36%.

Stock Valuation

Last month, Piper Sandler analyst Nicole Miller Regan reiterated a buy rating on Sysco stock and cut the price target to $83 from $86, implying upside potential of 2.04% from current levels.

The consensus among analysts is a moderate buy based on 6 buys, 3 holds and 1 sell. Sysco’s average price target of $87.50 implies upside potential of 7.57% from current levels.

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