Sysco Corporation

Sysco Corporation reported a mixed Q3 with revenues above analyst expectations but missed out on meeting earnings estimates. The company saw double-digit growth in both top and bottom lines, with total sales growth of 11.7%. The positive momentum was supported by solid performance in the international division, with segment profits almost doubling YoY. Sequential improvements in supply chain operating expenses led to substantial operating leverage. Despite some industry softness in March, Sysco delivered strong sales growth throughout the quarter. Lower traffic and lower inflation rates are expected to continue throughout Q4. However, the company remains focused on productivity improvement and efficiency actions. Sysco is investing in its Recipe for Growth strategy, which includes increasing its fulfillment footprint and enhancing digital tools. Sysco’s management is confident in its ability to differentiate from its competitors, execute its sales playbook, and improve logistics expenses. Sysco’s brand is increasing its penetration rate, creating a mix of benefits, and positively impacting customer retention. The company plans to change its compensation program to incentivize its sales reps to grow their business profitably. We give Sysco Corporation a ‘Hold’ rating with a revised target price.