SYY - Sysco: Buy On Robust Dining Out Demand

2024-07-05 07:00:04 ET

Summary

• Sysco specialises in food distribution. Its past financial results have shown robust top-line growth and expanding profit margins in recent years.
• SYY's total addressable market has been consistently growing since 2000. After the decline in 2020 due to the impact of COVID-19, it has shown a strong recovery.
• In addition, the US foodservice industry is expected to continue to grow, but at a normalised rate.
• Americans continue to dine out despite higher prices, which supports the outlook for the foodservice industry. In addition, food-away-from-home has been consistently gaining market share from food-at-home.

Synopsis

Sysco ( SYY ) specialises in the distribution of food and related products. It supplies mainly to the foodservice or food-away-from-home industry and is also considered the largest distributor globally. SYY's past financial results have demonstrated robust top-line growth. In addition, its profit margins have expanded as well. For its most recent 3Q24, it reported net sales growth of 2.7% year-over-year, and margins remained robust. SYY's total addressable market has consistently grown since 2000, and we expect this trend to continue in 2024. Furthermore, food-away-from-home has also been consistently gaining market share from food at home. Despite higher prices, most Americans reported that they would still continue to dine out. Given the positive outlook, I am recommending a buy rating for SYY.

Historical Financial Analysis

Over the last three years, SYY has demonstrated robust top-line growth. In 2022 , its sales increased from 2021's $51.3 billion to $68.6 billion. This represents a year-over-year growth of 33.8%. The main driver of this growth was volume growth. Local case volume improved by 10.3%, while total case volume in its US broadline operations increased by 15.4%. During the challenging supply chain period, SYY provided support to its customers by converting its supply chain to a six-day work week. As a result, this initiative allowed SYY to gain market share....

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