SYY Q4 Earnings Beat Estimates on Margin Gains, International Momentum

Sysco Corporation SYY has delivered impressive fourth-quarter fiscal 2025 results, wherein both top and bottom lines increased year over year. Also, both sales and earnings surpassed the Zacks Consensus Estimate.

Closer Look at SYY’s Q4 Results

Sysco’s adjusted earnings of $1.48 per share surpassed the Zacks Consensus Estimate of $1.40. This figure increased 6.5% year over year.

The global food product maker and distributor reported sales of $21,138 million, which moved up 2.8% year over year. The metric beat the Zacks Consensus Estimate of $21,002 million. Currency headwinds lowered the company’s sales by $100 million.

Sysco Corporation Price, Consensus and EPS Surprise

 

Sysco Corporation price-consensus-eps-surprise-chart | Sysco Corporation Quote

Sysco’s gross profit rose 3.9% to $4 billion, while the gross margin improved by 19 basis points to 18.9%. At the enterprise level, product cost inflation stood at 3.5% due to higher costs in the meat and dairy categories. Fiscal fourth-quarter gross profit growth was mainly attributed to the company’s effective handling of product cost inflation.

The company’s operating expenses rose 8.2% year over year to $3.1 billion due to a goodwill impairment in the Other segment, along with investments in business capacity and sales headcount. Adjusted operating expenses increased 4.9% year over year to $2.9 billion.

Operating income declined 9% to $889 million, while adjusted operating income inched up 1.1% to $1.1 billion. We note that the adjusted operating margin decreased 9 basis points year over year to 5.2% in the quarter under review. SYY’s adjusted EBITDA increased 1.8% to $1.3 billion.

SYY Provides Insights by Segments

The U.S. Foodservice Operations: Sysco’s U.S. Foodservice segment faced headwinds from reduced industry foot traffic and ongoing investments in capacity and workforce, which weighed on volume performance.

Fiscal fourth-quarter sales rose 2.4% year over year to $14.8 billion, beating the consensus estimate of $14.7 billion. Total case volume declined 0.3%, whereas local case volume saw a steeper drop of 1.5%. Gross profit grew 2.8% to $2.9 billion, with the gross margin expanding by 8 basis points to 19.5%. Operating expenses increased 5.7%, while adjusted operating expenses rose 5%. Operating income declined 2% to $1 billion, and adjusted operating income dipped 0.8% to $1.1 billion.

International Foodservice Operations: Sysco’s International Foodservice segment demonstrated strong performance, supported by effective margin management, growth in local volume and double-digit profit expansion.

Sales for the fiscal fourth quarter increased 3.6% to $3.93 billion, beating the consensus estimate of $3.88 billion. On a constant-currency basis, sales rose 1% to $3.8 billion. Foreign exchange contributed $101 million to International Foodservice sales and $100 million to total Sysco sales. Excluding the impacts of the divested Mexico joint venture, International Foodservice sales grew 8.3% and total Sysco sales rose 3.7%.

Gross profit climbed 7.6% to $847 million, with the gross margin improving by 80 basis points to 21.6%. On a constant-currency basis, gross profit increased 4.2% to $820 million. FX contributed $27 million to both International and total Sysco gross profit. Operating expenses rose 4.5%, while adjusted operating expenses increased 4.3%. On a constant-currency basis, adjusted operating expenses rose 0.6%. FX added $23 million to both International and total Sysco operating expenses.

Operating income grew 26.1% to $145 million, and adjusted operating income rose 20.1% to $197 million. On a constant-currency basis, adjusted operating income increased 17.7% to $193 million. FX contributed $4 million to both international and total Sysco operating income for the quarter.

SYGMA: The segment’s sales were $2,164 million, beating the consensus estimate of $2,132.6 million and rising 5.9% year over year.

Meanwhile, the Other segment’s sales decreased 7.1% year over year to $288 million.

SYY Stock’s Past 3-Month Performance

Sysco’s Financial Health Snapshot

This Zacks Rank #3 (Hold) company ended the quarter with cash and cash equivalents of $1.07 billion, long-term debt of $12.4 billion, and total shareholders’ equity of $1.83 billion.

Net cash provided by operating activities was $2.51 billion for the 52 weeks of fiscal 2025, while the free cash flow amounted to $1.82 billion. Capital expenditure, net of proceeds from sales of plant and equipment, was $692 million during this time.

In the 52 weeks of fiscal 2025, Sysco returned $2.3 billion to its shareholders through share buybacks worth $1.3 billion and dividends of $1 billion.

SYY’s FY26 Outlook

Building on the sales and adjusted EPS growth achieved in fiscal 2025, Sysco expects sales to grow 3-5% in fiscal 2026 to $84-$85 billion. Adjusted earnings per share are projected to increase 1-3% to $4.50-$4.60. This guidance includes a headwind of $100 million, or 16 cents per share, related to the prior year’s lower incentive compensation.

Excluding this impact, adjusted EPS growth is anticipated to be 5-7%, with the mid-point aligning with the company’s long-term growth targets. The focus remains on strong operational execution amid continued macroeconomic uncertainty. For fiscal 2026, the company plans to return $2 billion to shareholders, split evenly between dividends and share repurchases.

SYY shares have lost 12.5% in the past three months compared with the industry’s decline of 0.4%.

Some Solid Staple Bets

We have highlighted three better-ranked stocks from the Consumer Staples sector, namely Post Holdings POST, Treehouse Foods, Inc. THS and Vital Farms Inc. VITL.

Post Holdings is a consumer packaged goods holding company. POST presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Post Holdings’ current sales and earnings indicates growth of 2.7% and 7.3%, respectively, from the year-ago period’s reported figures. POST delivered a trailing four-quarter earnings surprise of 22.9%, on average.

Treehouse Foods is a manufacturer of packaged foods and beverages. It currently flaunts a Zacks Rank of 1.

THS delivered a trailing four-quarter earnings surprise of 58.8%, on average. The consensus estimate for Treehouse Foods’ current financial-year sales and earnings indicates growth of 0.4% and a decline of 5.8%, respectively, from the year-ago period’s reported figures.

Vital Farms offers a range of produced pasture-raised foods. VITL delivered a trailing four-quarter average earnings surprise of 45.3%.

The consensus estimate for VITL’s current financial-year sales and earnings indicates growth of 22.6% and a decline of 7.6%, respectively, from the prior-year reported levels.

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This article originally published on Zacks Investment Research (zacks.com).

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