Please ensure Javascript is enabled for purposes of website accessibility

Why Shares of Sysco Corp. Jumped 11% in February

By Timothy Green - Mar 3, 2016 at 8:20PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The food distributor managed to grow earnings faster than analysts expected.

Image Source: Sysco

What: Shares of food distribution company Sysco (SYY 5.86%) jumped 10.8% during February, according to data provided by S&P Global Market Intelligence. Much of the gain was due to Sysco's fiscal second-quarter earnings report, which pushed the stock to a new 52-week high.

So what: Sysco reported quarterly revenue of $12.15 billion, up 0.6% year over year and in line with analyst expectations. Non-GAAP EPS of $0.48 beat analyst estimates by $0.07, driven by revenue growth and a 50-basis-point increase in gross margin. Real growth, a non-GAAP measure that adjusts for food cost inflation, acquisitions, and currency, rose 3% year over year.

Sysco CEO Bill DeLaney pointed to strong volume growth as the driver behind the company's solid quarter:

I am very pleased with our second-quarter results. We achieved strong local case growth, while managing gross margins well and also containing operating expense growth. Through the first six months of the year, we are on track to achieve our financial objectives for the first year of our three-year plan.

Now what: While Sysco's results were far from stellar, they come at a time when smaller rival United Natural Foods (UNFI 2.77%) is struggling. Shares of United Natural Foods tumbled in late February after the company reported its own second-quarter results, the highlights of which were slowing revenue growth, declining earnings, and disappointing guidance.

SYY Chart

SYY data by YCharts.

Despite Sysco's earnings having declined significantly since 2010, driven down by falling margins, the stock has surged, with February's jump pushing Sysco to new highs. Sysco is an expensive stock, trading at 35 times trailing-12-month earnings, a high price to pay for extremely slow growth. But Sysco's dominance of the industry is certainly worth something, and investors appear willing to pay a hefty premium for its shares.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Sysco Corporation Stock Quote
Sysco Corporation
$85.57 (5.86%) $4.74
United Natural Foods, Inc. Stock Quote
United Natural Foods, Inc.
$40.50 (2.77%) $1.09

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/27/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.