
Sysco (SYY) Stock Gains, Wells Fargo Bullish on Turnaround
NEW YORK (TheStreet) -- Sysco Corp. (SYY) - Get Report shares are increasing 1.87% to $41.92 on Thursday after Wells Fargo Securities this morning initiated coverage of the food products distribution company with an "outperform" rating and lifted its price target to $45 from $44.
Analysts praised Sysco's turnaround efforts as the company is making progress from years of declining profitability.
"Despite activist investor-driven valuation expansion over the past several months, we believe risk/reward is still attractive given stable underlying business trends, strong cash flow and potential for operational and cost savings improvement," the firm said.
While the company faces some challenges including growing competition and food deflation, industry fundamentals appear stable and Sysco is in a good position to grow, analysts added.
Overall, the firm is taking a bullish stance regarding the company's upcoming opportunities and improving performance.
Houston, TX-based Sysco markets and distributes a range of food and related products primarily to the foodservice or food-away-from-home industry.
Separately, TheStreet Ratings team rates SYSCO CORP as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:
We rate SYSCO CORP (SYY) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and solid stock price performance. We feel its strengths outweigh the fact that the company has had somewhat disappointing return on equity.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- SYY's revenue growth has slightly outpaced the industry average of 3.5%. Since the same quarter one year prior, revenues slightly increased by 0.9%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- The current debt-to-equity ratio, 0.58, is low and is below the industry average, implying that there has been successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.99 is somewhat weak and could be cause for future problems.
- SYSCO CORP's earnings per share declined by 12.8% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, SYSCO CORP reported lower earnings of $1.16 versus $1.58 in the prior year. This year, the market expects an improvement in earnings ($1.94 versus $1.16).
- The change in net income from the same quarter one year ago has exceeded that of the S&P 500 and the Food & Staples Retailing industry average. The net income has decreased by 12.3% when compared to the same quarter one year ago, dropping from $278.81 million to $244.42 million.
- After a year of stock price fluctuations, the net result is that SYY's price has not changed very much. Although its weak earnings growth may have played a role in this flat result, don't lose sight of the fact that the performance of the overall market, as measured by the S&P 500 Index, was essentially similar. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
- You can view the full analysis from the report here: SYY








