Sysco Shares Surge 5% as Food Deflation Boosts Margins

sysco-syy-logoFood service giant SYSCO Corporation (NYSE:SYY) this morning posted better-than-expecte fiscal fourth quarter earnings results, as lower food costs helped lift its margins. Shares jumped 5% in early trading.

Houston-based SYSCO, which delivers food to restaurants and other service-oriented companies, reported Q4 adjusted net income of 64 cents per share, beating Wall Street’s estimate of 61 cents. Revenue rose 10% from last year to $13.65 billion, which was in-line with analysts’ view.

For the full fiscal year 2016, sales rose 3.5% to $50.4 billion, or 1.5% on a 52-week basis. Gross margin increased 38 basis points to 17.9%, helped by deflationary forces on food costs.

Other notes from the report included:

  • Capital expenditures (CapEx) were $504 million for fiscal 2016.
  • Cash flow from operations was $1.9 billion for fiscal 2016, up 24% from the prior year.
  • The company ended fiscal 2016 with $3.919 billion in cash and equivalents, down from $5.13 billion in the prior year.

From the press release:

“I am very pleased with our performance during fiscal 2016, as we made significant progress toward our three-year plan financial objectives. During the year, we had strong local case growth, improved our gross profit, managed expenses well and drove increased operating income,” said Bill DeLaney, Sysco’s chief executive officer. “Looking forward, we remain highly focused on supporting the success of our customers, profitably growing our business and achieving the objectives of our three-year plan.”

The company did not issue any specific guidance for fiscal 2017.

SYSCO shares jumped $2.44 (+4.67%) to $54.65 in premarket trading Monday following the report. SYY has gained over 27% year-to-date, nearly four times the return of the S&P 500 in the same period.

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