Why Is Sysco (SYY) Up 3.2% Since Last Earnings Report?

It has been about a month since the last earnings report for Sysco (SYY). Shares have added about 3.2% in that time frame, outperforming the S&P 500.Will the recent positive trend continue leading up to its next earnings release, or is Sysco due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts. Sysco Q1 Earnings Lag Estimates, Sales Fueled by International GrowthSysco delivered first-quarter fiscal 2025 results, wherein the top and bottom lines grew year over year. Earnings missed the Zacks Consensus Estimate, while sales surpassed the same. Sysco’s adjusted earnings of $1.09 per share missed the Zacks Consensus Estimate of $1.13. Nevertheless, the bottom line rose 1.9% year over year.The company reported sales of $20,484 million, which jumped 4.4% year over year. The metric surpassed the Zacks Consensus Estimate of $20,447 million. International markets continue to be a key growth driver for Sysco, while the specialty sector is gaining traction in the marketplace. Total team selling efforts are also accelerating, enhancing momentum and overall performance.Sysco remains on track to enhance local volume growth and margins in the second half of the year, supported by a strengthening pipeline. The first-quarter results included an improved exit rate in September and an impressive pipeline of investments and initiatives. This supports Sysco's fiscal 2025 guidance of 4-5% sales growth and 6-7% adjusted EPS growth.The company’s recent actions are leading to structural financial improvements, positioning Sysco to strengthen its leadership in the industry as volumes increase. Management remains on track to return nearly $2 billion to shareholders for the fiscal year.A Closer Look at SYY’s Q1 ResultsSysco’s gross profit rose 2.9% to $3.8 billion on the back of favorable volumes and effective product cost inflation management. However, the gross margin contracted 27 bps to 18.3%. SYY witnessed product cost inflation of 2.2% at the overall enterprise level, measured by the estimated change in product costs in the meat and poultry categories.The company’s operating expenses rose 3.6%, thanks to higher volumes, cost inflation and increased selling costs. The adjusted operating expenses escalated by 3.1%.Sysco’s operating income inched up 0.5% to $808 million, while adjusted operating income rose 2.2% to $873 million. Sysco’s adjusted EBITDA jumped 4.4% to $1.1 billion.SYY Provides First-Quarter Insights by SegmentThe U.S. Foodservice Operations: In the reported quarter, sales rose 4.6% to $14,362 million. Local case volumes within the U.S. Foodservice grew 0.2%, while total case volumes within the same segment increased 2.7%. Segmental adjusted operating income fell 3% to $925 million. The segment’s performance was driven by increased volumes countered by margin pressures due to mix shifts and selling investments.International Foodservice Operations: In the fiscal first quarter, segmental sales rose 3%, reaching $3,794 million. When adjusted for constant currency (cc), sales also stood at $3,789 million, reflecting a 2.9% increase. Foreign exchange fluctuations positively impacted sales, contributing an additional $5 million to International Foodservice Operations and total Sysco sales. Adjusted operating income grew 12.1% to $130 million on a cc basis. Overall, the segment achieved notable sales growth, efficient margin management and profit growth.SYGMA’s sales came in at $2,046 million, up 7.3% year over year.Meanwhile, the Other segment’s sales decreased 8.1% to $282 million.Sysco’s Financial Health SnapshotThe company ended the quarter with cash and cash equivalents of $733 million, long-term debt of $11,869 million and total shareholders’ equity of nearly $2,207 million.Cash flow from operations stood at $53 million for 13 weeks ended Sept. 28, 2024, while free cash flow amounted to $8 million. Capital expenditures, net of proceeds from sales of plant and equipment, amounted to $45 million during this time.During the quarter, Sysco returned $359 million to its shareholders through share buybacks worth $108 million and dividends of $251 million.How Have Estimates Been Moving Since Then?In the past month, investors have witnessed a downward trend in estimates revision.VGM ScoresCurrently, Sysco has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.OutlookEstimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Sysco has a Zacks Rank #4 (Sell). 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