Sysco: A Great Company At A Reasonable Price

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We recently added Sysco Corporation (SYY) to our buy list. You may be familiar with the name, as Sysco is the leading global provider of food products, asserts Hilary Kramer, editor of Value Authority.

The company distributes a complete range of foods, including frozen and fresh meats, vegetables, canned foods, and beverages, as well as related disposable and paper products. Its primary customers prepare meals away from home, with 63% of its annual sales coming from restaurants.

The majority of its remaining sales are roughly evenly divided between healthcare facilities, government and educational institutions, and the travel and leisure industry. Its operations are run through 333 distribution centers, 190 of which are in the United States. Revenues from outside the U.S. account for approximately 17% of the total.

Sysco has a long history of profitable growth, which is reflected in the strong performance of the stock over a multi-year period. To achieve its growth goals, the company plans to continue to make strategic acquisitions. Sysco should also have success through its customer loyalty program, Sysco Your Way and Perks.

The company has come through the adverse impact of the pandemic well on the top-line, and it will surely see improvement on the bottom-line as volumes continue to grow and wage pressures decline. The first half of fiscal year 2023 has started well for the company, with sales up 15.1% and EPS up 12.3%.

However, the stock fell back after it recently reported second-quarter earnings, as EPS of $0.80 was $0.04 short of expectations. I think the recent decline represents a good buying opportunity. I believe EPS for the current year can come in at the high range of guidance at around $4.15, and it could improve to $4.50 in the June 2024 fiscal year.

When you consider that this industry leader has a long history of growth, trades at 17X fiscal 2024 estimates, and has a 2.5% dividend yield, it’s easy to see why I think SYY is attractively valued. I would say the stock is a buy below $80. My $92 target is where the stock traded in April 2022.

About the Author

Hilary Kramer is an investment analyst and portfolio manager with 30 years of experience on Wall Street. The Financial Times describes her as "A one-woman financial investment powerhouse," and The Economist distinguishes her as "One of the best-known investors in America."

Ms. Kramer independently published newsletters including GameChangers, Value Authority, High Octane Trader, 2-Day Trader, IPO Edge, and Inner Circle. She is often quoted in publications such as the Wall Street Journal, New York Post, Bloomberg, and Reuters. Ms. Kramer is a frequent guest commentator on CNBC, CBS, Fox News, and Bloomberg, providing investment insight and economic analysis.

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