SYY - Embedded Expectations Analysis - 2019 03 15
Sysco Corporation (SYY:USA) currently trades near historical averages relative to UAFRS-based Earnings, with a 20.5x Uniform P/E, implying bullish expectations for the firm. However, management has concerns about traffic decreases, margin expansion, and cost-cutting initiatives.Specifically, management may be concerned about continued traffic declines, and their ability to improve International segment costs, opex, and inbound freight. Moreover, they may lack confidence in their ability to sustain gross margin expansion, and may be exaggerating the margin impacts of cost-cutting initiatives. In addition, they may be concerned about competitive pressures in wine and spirits distribution, and softer volume from their HFM acquisition. Finally, management may be exaggerating their ability to streamline organizational changes, the potential of their innovative product launches, and the independence of Waugh Foods.
Sysco, acting through its subsidiaries and divisions, is a distributor of food and related products primarily to the foodservice or food-away-from-home industry. The company has three reportable segments: United States Foodservice Operations, which primarily include United States Broadline operations, which distribute a line of food products, including custom-cut meat, seafood, specialty produce, specialty imports and a variety of non-food products; International Foodservice Operations, which include operations in the Americas and Europe, which distribute a line of food products and a variety of non-food products; and SYGMA, which consists of its United States customized distribution subsidiary.
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