Sysco's Sales Perform Well, But Case Growth Concerns Weigh On Stock, Say Analysts

Truist Securities analyst Jake Bartlett reiterated a Buy rating on the shares of Sysco Corp SYY and lowered the price forecast from $85 to $83.

For the second quarter, adjusted EBITDA of $969 million fell slightly short of the analyst’s estimate of $975 million and the consensus of $973 million, primarily due to operating costs, despite gains from a sale-leaseback arrangement.

Total sales of $20.151 billion were close to the analyst’s estimate of $20.218 billion and the consensus of $20.097 billion and EPS of $0.93 exceeded both the analyst’s estimate and consensus of $0.92, driven by a lower-than-expected adjusted tax rate.

For the second quarter, US Foodservice (USFS) case growth slowed to 1.4%, down from 2.7% in the first quarter.

Although restaurant traffic improved by approximately 200 basis points, the company faced more challenging comparisons and was impacted by weather conditions, particularly in the Southeast, Florida, and Texas, said the analyst.

Looking ahead, the analyst expects USFS case growth to pick up due to macro tailwinds, improved sales team stability after changes to compensation structures, and a stronger sales force.

The analyst remains optimistic that SYY’s initiatives to boost sales, favorable macro trends, and efforts to expand margins will drive accelerated EBITDA growth and enhance its multiple.

However, the company’s relatively weak independent case growth, particularly compared to restaurant traffic trends, cautions the analyst and limits expectations for a significant upside in the stock.

Guggenheim analyst John Heinbockel reiterated a Buy rating on the shares with a $85 price forecast.

According to the analyst’s discussions with investors, concerns have been raised about the ongoing weakness in local case growth despite the continued ramp-up of the sales force expansion.

Addressing this challenge is likely the most critical factor influencing the stock’s performance in the coming quarters. If local case growth turns positive, it could lead to significant upside, but if the efforts fall short, it may result in a reduction of the sales force expansion, opined the analyst.

Since investments in the sales force typically align with local case growth and easier year-ago comparisons are approaching, the analyst anticipates a return to positive growth by the first half of 2026.

Price Action: SYY shares are trading higher by 0.30% at $72.50  at the last check Wednesday.

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