Will Sysco Earnings Make Growth Investors Happy?

Sysco (SYY 0.43%) will release its quarterly report on Monday, and the food-services giant has continued to act as a stalwart in the consumer-goods space, holding up well even during the stock market turbulence during the latter part of the quarter. But for Sysco earnings, a lack of strong growth could lead to some discontent among investors who believe that the company's competitive advantages should allow it to open more doors, especially in more promising segments of the industry.

With its extensive distribution and services network, Sysco has much of the restaurant industry relying on it for many of its needs. But as the giant in its specialty, Sysco has competitors looking up at its success and seeking to emulate it by carving away at potentially lucrative niches within the broader food space. Let's take an early look at what's been happening with Sysco over the past quarter and what we're likely to see in its quarterly report.

Stats on Sysco

Source: Yahoo! Finance.

Can Sysco earnings give investors a positive surprise this quarter?
In recent months, analysts have generally stayed pretty stable in their views on Sysco earnings, keeping June-quarter estimates unchanged and cutting full-year fiscal 2014 projections by just 1%. The stock has given shareholders similarly muted reactions, with a gain of less than 3% since early May.

Sysco has consistently produced solid business results, taking advantage of its scale to create competitive advantages in efficiency that have largely held its peers at bay. Yet the company has faced some headwinds recently. In its previous quarterly report in May, the company saw its net income fall by 22% as costs rose and sales fell short of analyst estimates. Sysco noted that concerns about household finances could have been to blame for weaker demand among its clients, and it also cited poor weather conditions as a potential factor.

Sysco has done a good job of serving food needs for the military as well. The company announced multiple contract wins from the Pentagon during the quarter, including a $67.5 million contract in June and another $32.3 million contract at the end of July.

But Sysco does face competitive threats. United Natural Foods (UNFI -0.90%) has taken advantage of the huge increase in demand for natural foods, with its specialized network helping to bring organic and natural food products to supermarkets and other food customers. The success of Whole Foods Market (WFM) has also played a key role in United Natural's growth, as Whole Foods makes up roughly a third of United Natural's overall sales. Whole Foods is poised to keep growing at its rapid pace, and as long as it does, United Natural should gain from riding on its coattails.

In the Sysco earnings report, watch for the company to give its opinion on general conditions in the restaurant industry. As the economy is perceived to improve, Sysco should hopefully be able to see overall results improve, and strategic moves to try to boost its influence in the natural foods space could address investor concerns about its potential future growth.

Click here to add Sysco to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.