J.P. Morgan Has $30 Target, Overweight Rating On Sysco (SYY)

J.P. Morgan is out with a research report this morning on SYSCO Corporation SYY saying that it prefers McDonalds and Yum Brands in this environment. It has a $30 target and a Neutral rating. In the research report, J.P. Morgan notes, "At the current F11E multiple of 14.1x, we believe investors are better advised to own MCD and YUM at 15.9x and 16.7x (June 2011) for their higher near-term operating income growth and FCF generation (11%-13% at MCD, 12%-14% for YUM) and relatively low-risk global expansion potential. Additionally, while we believe SYY’s ERP will prove beneficial for both customers and shareholders, we view timing and cost of such a major transformation as incremental risk relative to MCD and YUM. Lastly, over the past few years, since restaurant industry growth has slowed, SYY has traded at an average 1.3x multiple discount to Global QSR (YUM/MCD) and a 1.7x multiple discount to Global CPG. Current C11E multiples show SYY is trading at a 1.2x discount to MCD, a 1.5x discount to YUM, and a 0.3x discount to Global CPG, suggesting valuation is not significantly compelling at these levels." Shares of SYSCO Corporation gained 15 cents yesterday to close at $28.63 in a broadly weaker market.