SYY - Embedded Expectations Analysis - 2020 04 09
Sysco Corporation (SYY:USA) currently trades below historical averages relative to UAFRS-based (Uniform) earnings, with a 14.0x Uniform P/E. At these levels, the market has bearish expectations for the firm, and management may be concerned about their pricing, growth opportunities, and market penetrationSpecifically, management is confident that they had trouble passing along higher inflation-driven prices. They may also lack confidence in their ability to execute on their capital allocation priorities, improve working capital, and increase operating efficiencies that can help fund growth. In addition, they may be exaggerating their ability to compete in urban markets, the potential of their investments and capabilities, and their growth opportunities in underpenetrated markets. Furthermore, they may be concerned about the impact of their Iowa Premium divestiture, restaurant traffic, and inflationary headwinds. Moreover, they may lack confidence in their ability to reduce costs, normalize their capital spending, and standardize processes across their operating businesses. Finally, they may lack confidence in their ability to sustain improvements in their Mexican business and SYGMA segment, and they may be exaggerating their ability to drive growth in the U.S. independent space
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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