Next Monday, Sysco (SYY 0.83%) will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed knee-jerk reaction to news that turns out to be exactly the wrong move.

Sysco dominates the food-services industry, with hundreds of thousands of restaurants, institutional food providers, and other customers turning to the giant for their needs. Despite some weakness in the restaurant industry, Sysco has managed to return to multi-year highs, but can its fundamentals keep pace with its stock? 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

Analyst EPS Estimate


Change From Year-Ago EPS


Revenue Estimate

$11.1 billion

Change From Year-Ago Revenue


Earnings Beats in Past 4 Quarters


Source: Yahoo! Finance.

Will Sysco's earnings look more appetizing this quarter?
In recent months, analysts have scaled back a bit on their earnings estimates for Sysco, dropping their consensus by $0.02 per share for the just-finished quarter and by $0.03 for the full 2013 fiscal year. Yet the stock hasn't hesitated in its upward climb, rising 10% since late January.

Sysco hasn't generated much in the way of newsworthy events over the past quarter, as it continues to execute well on its business model. Given its scale, Sysco's distribution network is critical to its smooth functioning, and its nationwide scope gives it an opportunity to add to its business through acquisitions that help it fill out its overall footprint to serve customers better.

Yet the ongoing challenge that Sysco has faced is the rising cost of food products. Typically, you'd expect a company Sysco's size to be able to pass those costs on to its customers. Sysco has made efforts to use its scale to impose pricing power on food producers, as margins at egg-giant Cal-Maine Foods (CALM 0.17%) and chicken-producer Tyson (TSN 0.32%) have fallen much more sharply. Yet Sysco has still seen greater margin compression than United Natural Foods (UNFI -0.30%), its organic-specialist peer. That may simply be due to the fact that organic prices have always been somewhat higher than conventional food, leaving United's customers more acquainted with the fluctuations in prices than Sysco's customers.

In Sysco's quarterly report, watch for the company to show how it plans to respond if food input prices stay high. For Sysco to justify its lofty current valuation, it needs to demonstrate its ability to use its scale to better advantage.

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