Sysco Drops on Mediocre Earnings

Sysco ($SYY) just reported earnings of 57 cents per share which was inline with analysts’ estimates. However, it was well below my estimate of 60 cents per share, plus or minus two cents.

“Looking at the overall business landscape, for some time now we have characterized the current economic recovery as slow, choppy, uneven and even fragile. Our fourth-quarter results and the events that have played out in Washington and in the financial markets over the past few weeks certainly support that outlook,” said Chief Executive Bill DeLaney on a conference call. “Nevertheless, we continue to believe that our industry will experience modest real growth over the long term.”

The company, which derives most of its sales from the restaurant industry, said its sales growth of 0.7% for the quarter was affected by inflation, acquisitions and currency translations, and that aside from these factors, its sales would have risen 1%. The company also said volume growth was positive for the quarter but remains at modest levels.”

Sysco is undergoing a major business-transformation project with a pilot in place at an Arkansas facility that it says will help drive growth and increase productivity. However, due to problems, such as the speed of taking and processing orders, it is delaying the wider rollout of the new system. It says it is still evaluating the financial impact of the delay.

Some analysts believe the delay is chalked up more to the company’s avoiding the capital spending on a full launch during such an uncertain economy. However, Sysco said that even with headwinds such as inflation not appearing to be letting up in the next couple quarters, it hasn’t come to that yet.

The stock dropped as much as 5.8% today, although it recovered some and finished 3.93% lower. With the lower price, the dividend yield is now 3.7%.

Posted by on August 15th, 2011 at 10:26 am


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