As 2013 begins, now's a good time to look at the future prospects for the stocks you own. If you don't know where a company's headed in the next year and beyond, then it's impossible to make an informed decision about whether you should add the stock to your portfolio -- or sell it if you already own it.
Today, I'll look at Sysco (SYY 0.27%). The leader in food services served up nice gains in 2012, overcoming some economic headwinds to post reasonable sales growth. But the company wants to do more this year to cement its leadership position in the industry. Below, you'll learn more about Sysco's prospects for 2013.
Stats on Sysco
|
| |
|---|---|
|
Average Stock Target Price |
$29.63 |
|
Fiscal 2013 EPS Estimate |
$1.94 |
|
Fiscal 2014 EPS Estimate |
$2.12 |
|
Fiscal 2013 Sales Growth Estimate |
5.2% |
|
Fiscal 2014 Sales Growth Estimate |
5.2% |
|
Forward P/E |
14.8 |
Source: Yahoo Finance.
Will Sysco be a tasty stock in 2013?
Analysts seem to think that despite some good fundamental prospects, Sysco's stock is overpriced. Expectations point to continued solid revenue and earnings growth, but target stock prices are actually more than 5% below where the shares currently trade.
Sysco is in a position few U.S. companies can claim: utter dominance in a sizable market segment. With its control of the bulk of food distribution business domestically, Sysco relegates competitors United Natural Foods (UNFI 3.21%), Nash Finch (NASDAQ: NAFC), and Core-Mark (CORE +0.00%) to niche roles. United Natural's focus on organics and health-conscious foods is particularly timely, while Core-Mark's catering to convenience stores and Nash Finch's independent retail and military commissary business also fill important roles in the industry, but Sysco nevertheless is the giant of the group.
Sysco has identified acquisitions as an important method of boosting overall sales, especially on the international front. Commenting on the company's buyout of the Distagro division of Canada's Metro Richelieu, CFO Chris Kreidler pointed to a goal of raising revenue by 0.5% to 1% through acquisitions on an annual basis.
Still, Sysco faces continued headwinds in terms of high food costs. Although the company benefited from the fiscal cliff resolution to the farm bill, without which dairy prices might have doubled, it still has to deal with an agricultural environment in which food producers have leverage over distributors. Moreover, although it can pass costs on to customers, those customers are already dealing with narrow margins and squeezing them further may not be possible.
For 2013, Sysco appears to be making moves to position itself as well as possible for the current environment. With some help, investors might give the shares more upside than analysts expect.
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