Houston, Texas-based Sysco Corporation (SYY) markets and distributes various food and related products to the food service or food-away-from-home industry. Valued at a market cap of $34.3 billion, the company provides products and related services to customers, including restaurants, health care and educational facilities, lodging establishments, and other food service customers.
The food distributor's shares have lagged behind the broader market over the past 52 weeks. Sysco has declined 11.8% over this time frame, while the broader S&P 500 Index ($SPX) has gained 20.7%. Moreover, the stock is down 8.2% on a YTD basis, compared to SPX’s 3.1% rise during the same time frame.
Zooming in further, SYY’s underperformance looks even more pronounced when compared to the Consumer Staples Select Sector SPDR Fund’s (XLP) 9.2% return over the past 52 weeks and 1.6% gain on a YTD basis.
On Jan. 28, shares of Sysco plunged almost 6% following the release of its Q2 earnings report, despite delivering slightly better-than-expected Q2 revenue of $20.2 billion and adjusted earnings of $0.93 per share, which came in line with the Street’s forecast. However, investors remained unimpressed by the results. A 2% decline in foot traffic to restaurants in the U.S. and a marginal fall in the U.S. Foodservice segment’s operating income, indicating potential challenges in this key area of the business, might have lowered investor confidence.
Additionally, the company expects inflationary pressures, particularly in dairy and protein categories, to persist, potentially impacting cost management. Cash flow from operations for the first 26 weeks of fiscal year 2025 significantly declined year-over-year to $498 million, further adding to the downtick.
For the current fiscal year, ending in June 2025, analysts expect Sysco’s EPS to grow 6.3% year-over-year to $4.58. The company’s earnings surprise history is mixed. It topped or met the Wall Street estimates in three of the last four quarters while missing on another occasion.
Among the 17 analysts covering the stock, the consensus rating is a “Moderate Buy,” which is based on 11 “Strong Buy” and six “Hold” ratings.
On Jan. 27, BofA maintained a “Buy” rating on SYY and raised its price target to $92.
As of writing, SYY is trading below the mean price target of $84.31. The Street-high price target of $95 suggests an upside potential of 35.3%.
