NEW YORK (TheStreet) -- On Tuesday, a federal judge ruled that Sysco Corp (SYY) - Get Report cannot merge with its largest competitor, US Foods, without approval from antitrust regulators.

"While we respect the court's decision, we are profoundly disappointed with this outcome. We diligently pursued this transaction for nearly two years because we strongly believed the merger of Sysco and US Foods would be procompetitive and good for customers, associates and shareholders," Sysco CEO Bill DeLaney said in a statement.

In February, the FTC sued to stop Sysco's $3.5 billion offer to buy US Foods, reports. The Federal Trade Commission believes the merger would be anticompetitive as Sysco and US Foods control 75% of that market.

"The Federal Trade Commission has shown that there is a reasonable probability that the proposed merger will substantially impair competition in the national customer and local broadline markets and that the equities weigh in favor of injunctive relief," Judge Amit Mehta said, noted.

Sysco said it understands the court's decision and is "developing plans" to move the business forward. Sysco will continue to review the ruling and "access our legal and contractual obligations." The company said it will also examine the "merits of terminating the merger agreement."

Shares of Sysco are down by 0.03% to $37.59 in pre-market trading on Wednesday morning.

Separately, TheStreet Ratings team rates SYSCO CORP as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate SYSCO CORP (SYY) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations and reasonable valuation levels. We feel its strengths outweigh the fact that the company shows low profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • SYY's revenue growth has slightly outpaced the industry average of 5.0%. Since the same quarter one year prior, revenues slightly increased by 4.2%. 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.
  • Net operating cash flow has slightly increased to $408.06 million or 4.65% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -24.50%.
  • SYSCO CORP' earnings per share from the most recent quarter came in slightly below the year earlier quarter. 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 $1.58 versus $1.68 in the prior year. This year, the market expects an improvement in earnings ($1.83 versus $1.58).
  • In its most recent trading session, SYY has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. 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 Ratings Report