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Why Sysco Stock Gained 23% in April

By Demitri Kalogeropoulos - May 8, 2020 at 11:13AM

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The food giant's business is under pressure but holding up through the early phases of the pandemic.

What happened

Sysco (SYY -0.45%) shares outperformed a rallying market last month. The stock gained 23% compared to a 13% increase in the S&P 500, according to data provided by S&P Global Market Intelligence.

The food giant's shares remain far lower year to date, though, down 39% compared to a 10% decrease in the broader market.

A waiter serving a table of diners.

Image source: Getty Images.

So what

Investors' worries about an abrupt business collapse were eased last month. While many of Sysco's restaurant partners closed their dining rooms, most continued to do business using their drive-thru, pickup, and home delivery channels. Wall Street's mood improved following aggressive Federal Reserve moves aimed at avoiding a financial crisis or deep recession.

Now what

In an earnings report in early May, Sysco confirmed major strain to its business brought on by the COVID-19 pandemic. "The extent of the crisis is more substantial than any other throughout the company's [50-year] history," management said in a press release that showed declining sales and profitability through late March.

The company is eager to see restaurants begin to serve customers again as economies around the world carefully reopen for business. In the meantime, its cash haul, amounting to $6 billion, should see the business through this difficult time for the industry.

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