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Investing in Sysco (SYY) Ahead of Q3 Earnings: Risks & Rewards
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Sysco Corporation (SYY - Free Report) is ready to come out with its third-quarter fiscal 2024 earnings results on Apr 30 before the opening bell, prompting investors to assess the opportunities and risks associated with investing in the company. Despite Sysco’s enticing investment potential, stemming from an extensive product range, proficiency of its sales team, strength of the supply chain and financial stability, it comes with its set of uncertainties.
Analysts' expectations paint a promising picture for Sysco’s upcoming earnings, with the Zacks Consensus Estimate for revenues standing at $19.74 billion. This indicates 4.6% growth from the prior-year figure.
The company is also anticipated to witness a year-over-year increase in its bottom line, with the consensus estimate for third-quarter earnings per share staying unchanged at 95 cents over the past 30 days. This forecast suggests an uptick of 5.6% from the year-ago period, hinting at potential earnings growth for this renowned seller, marketer and distributor of food products.
All said, the decision to invest in Sysco ahead of its quarterly earnings release demands a thoughtful evaluation of both potential rewards and inherent risks.
Sysco Corporation Price, Consensus and EPS Surprise
Sysco’s focus on enhancing efficiency through supply-chain productivity and structural cost-containment efforts has been yielding positively. Gains from buyouts, like Edward Don & Company and BIX Produce, among others, have been adding to the company’s strength. SYY has been benefiting from its Recipe for Growth strategy, which is strengthening the company’s capacities across sales and the supply chain.
The company’s five strategic pillars include enhancing customers’ experience via digital tools, improving the supply chain to cater to customers efficiently and consistently (through better delivery and omnichannel inventory management), providing customer-oriented merchandising and marketing solutions to augment sales, targeting team-based selling with an emphasis on important cuisines and cultivating new capacities, channels and segments, along with sponsoring investments via cost-saving initiatives.
While these factors give out positive signals, investors must also consider the risks. Sysco has been encountering product cost inflation. In the second quarter of fiscal 2024, the company witnessed product cost inflation of 1.1%, measured by the estimated change in product costs, mainly in the meat and frozen categories. Additionally, operating expenses rose 3.9% due to cost inflation and increased volumes. Any persistence of high costs could be a cause of concern.
Valuation Picture
From a valuation perspective, Sysco shares present an attractive opportunity, trading at a discount relative to historical and industry benchmarks. With a forward 12-month price-to-earnings ratio of 16.52, below the five-year median of 19.86 and the Food – Miscellaneous industry’s average of 16.68, the stock offers compelling value for investors seeking exposure to the sector. The stock currently has a Value Score of B, adding further validation to its appeal.
Further, the road ahead for Sysco appears promising, with the Zacks Consensus Estimate for sales for the current and next fiscal year standing at $79.46 billion and $83.2 billion, respectively. These figures indicate year-over-year growth of 4.1% and 4.7%. Similarly, the consensus estimate for earnings per share is pegged at $4.33 and $4.74 for the same periods, which suggests an increase of almost 8% and 9.4%, respectively. These projections reinforce the value proposition of investing in Sysco.
What the Zacks Model Unveils
Our proven model predicts an earnings beat for Sysco this time. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is the case here.
Sysco has an Earnings ESP of +0.06% and carries a Zacks Rank #3. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Other Stocks With the Favorable Combination
Here are three other companies worth considering as our model shows that these also have the correct combination to beat on earnings this time:
The Hershey Company (HSY - Free Report) has an Earnings ESP of +1.42% and a Zacks Rank #3. The company is likely to witness top-line growth when it reports first-quarter 2024 results. The Zacks Consensus Estimate for Hershey’s quarterly revenues is pegged at $3.12 billion, which suggests a rise of 4.5% from the figure reported in the prior-year quarter. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Hershey’s quarterly EPS has declined by a penny in the past seven days to $2.72, which calls for a decrease of 8.1% from the year-ago quarter’s level. HSY has a trailing four-quarter earnings surprise of 6.5%, on average.
Church & Dwight (CHD - Free Report) currently has an Earnings ESP of +1.00% and a Zacks Rank of 3. The company is likely to register top-line and bottom-line increases when it reports first-quarter 2024 numbers. The Zacks Consensus Estimate for Church & Dwight’s quarterly revenues is pegged at $1.49 billion, which implies growth of 4.3% from the figure reported in the prior-year quarter.
The Zacks Consensus Estimate for Church & Dwight’s quarterly earnings of 86 cents suggests a rise of 1.2% from the year-ago quarter’s levels. CHD has a trailing four-quarter earnings surprise of 9.7%, on average.
Coty (COTY - Free Report) currently has an Earnings ESP of +4.23% and a Zacks Rank #3. The company is expected to register top-line growth when it reports third-quarter fiscal 2024 numbers. The Zacks Consensus Estimate for COTY’s quarterly revenues is pegged at $1.37 billion, which suggests an increase of 6.6% from the prior-year quarter’s reported figure.
The Zacks Consensus Estimate for COTY’s quarterly earnings has been unchanged at 6 cents in the past 30 days, which calls for a 68.4% decline from the year-ago quarter’s reported number. COTY delivered an earnings beat of 115.3%, on average, in the trailing four quarters.
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Investing in Sysco (SYY) Ahead of Q3 Earnings: Risks & Rewards
Sysco Corporation (SYY - Free Report) is ready to come out with its third-quarter fiscal 2024 earnings results on Apr 30 before the opening bell, prompting investors to assess the opportunities and risks associated with investing in the company. Despite Sysco’s enticing investment potential, stemming from an extensive product range, proficiency of its sales team, strength of the supply chain and financial stability, it comes with its set of uncertainties.
Analysts' expectations paint a promising picture for Sysco’s upcoming earnings, with the Zacks Consensus Estimate for revenues standing at $19.74 billion. This indicates 4.6% growth from the prior-year figure.
The company is also anticipated to witness a year-over-year increase in its bottom line, with the consensus estimate for third-quarter earnings per share staying unchanged at 95 cents over the past 30 days. This forecast suggests an uptick of 5.6% from the year-ago period, hinting at potential earnings growth for this renowned seller, marketer and distributor of food products.
All said, the decision to invest in Sysco ahead of its quarterly earnings release demands a thoughtful evaluation of both potential rewards and inherent risks.
Sysco Corporation Price, Consensus and EPS Surprise
Sysco Corporation price-consensus-eps-surprise-chart | Sysco Corporation Quote
Measuring the Pros & Cons
Sysco’s focus on enhancing efficiency through supply-chain productivity and structural cost-containment efforts has been yielding positively. Gains from buyouts, like Edward Don & Company and BIX Produce, among others, have been adding to the company’s strength. SYY has been benefiting from its Recipe for Growth strategy, which is strengthening the company’s capacities across sales and the supply chain.
The company’s five strategic pillars include enhancing customers’ experience via digital tools, improving the supply chain to cater to customers efficiently and consistently (through better delivery and omnichannel inventory management), providing customer-oriented merchandising and marketing solutions to augment sales, targeting team-based selling with an emphasis on important cuisines and cultivating new capacities, channels and segments, along with sponsoring investments via cost-saving initiatives.
While these factors give out positive signals, investors must also consider the risks. Sysco has been encountering product cost inflation. In the second quarter of fiscal 2024, the company witnessed product cost inflation of 1.1%, measured by the estimated change in product costs, mainly in the meat and frozen categories. Additionally, operating expenses rose 3.9% due to cost inflation and increased volumes. Any persistence of high costs could be a cause of concern.
Valuation Picture
From a valuation perspective, Sysco shares present an attractive opportunity, trading at a discount relative to historical and industry benchmarks. With a forward 12-month price-to-earnings ratio of 16.52, below the five-year median of 19.86 and the Food – Miscellaneous industry’s average of 16.68, the stock offers compelling value for investors seeking exposure to the sector. The stock currently has a Value Score of B, adding further validation to its appeal.
Further, the road ahead for Sysco appears promising, with the Zacks Consensus Estimate for sales for the current and next fiscal year standing at $79.46 billion and $83.2 billion, respectively. These figures indicate year-over-year growth of 4.1% and 4.7%. Similarly, the consensus estimate for earnings per share is pegged at $4.33 and $4.74 for the same periods, which suggests an increase of almost 8% and 9.4%, respectively. These projections reinforce the value proposition of investing in Sysco.
What the Zacks Model Unveils
Our proven model predicts an earnings beat for Sysco this time. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is the case here.
Sysco has an Earnings ESP of +0.06% and carries a Zacks Rank #3. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Other Stocks With the Favorable Combination
Here are three other companies worth considering as our model shows that these also have the correct combination to beat on earnings this time:
The Hershey Company (HSY - Free Report) has an Earnings ESP of +1.42% and a Zacks Rank #3. The company is likely to witness top-line growth when it reports first-quarter 2024 results. The Zacks Consensus Estimate for Hershey’s quarterly revenues is pegged at $3.12 billion, which suggests a rise of 4.5% from the figure reported in the prior-year quarter. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Hershey’s quarterly EPS has declined by a penny in the past seven days to $2.72, which calls for a decrease of 8.1% from the year-ago quarter’s level. HSY has a trailing four-quarter earnings surprise of 6.5%, on average.
Church & Dwight (CHD - Free Report) currently has an Earnings ESP of +1.00% and a Zacks Rank of 3. The company is likely to register top-line and bottom-line increases when it reports first-quarter 2024 numbers. The Zacks Consensus Estimate for Church & Dwight’s quarterly revenues is pegged at $1.49 billion, which implies growth of 4.3% from the figure reported in the prior-year quarter.
The Zacks Consensus Estimate for Church & Dwight’s quarterly earnings of 86 cents suggests a rise of 1.2% from the year-ago quarter’s levels. CHD has a trailing four-quarter earnings surprise of 9.7%, on average.
Coty (COTY - Free Report) currently has an Earnings ESP of +4.23% and a Zacks Rank #3. The company is expected to register top-line growth when it reports third-quarter fiscal 2024 numbers. The Zacks Consensus Estimate for COTY’s quarterly revenues is pegged at $1.37 billion, which suggests an increase of 6.6% from the prior-year quarter’s reported figure.
The Zacks Consensus Estimate for COTY’s quarterly earnings has been unchanged at 6 cents in the past 30 days, which calls for a 68.4% decline from the year-ago quarter’s reported number. COTY delivered an earnings beat of 115.3%, on average, in the trailing four quarters.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.