A global leader in selling, marketing and distributor of food products, Sysco Corporation’s (SYY) fourth quarter 2012 adjusted EPS (for special items) of 55 cents beat the Zacks Consensus Estimate of 54 cents, by 1 cent, driven by solid top line growth. However, the adjusted EPS (excluding special items) declined 1.8% from the prior-year quarter. Adjusted diluted EPS (excluding underlying business) was 62 cents, up 3.3% from prior year quarter.
The adjusted earnings exclude the impact from underlying business like Multiemployer Pension Plan (MEPP), restructuring charges, tax benefits and special items like business transformation costs.
Revenue and Operating Income
Sysco's sales grew 5.9% on a year-over-year basis to $11.1 billion in the fourth-quarter of 2012, driven by 3.3% volume growth (excluding acquisitions) in Broadline and SYGMA operations. Food inflation for the quarter was 3.3%, particularly driven by poultry, meat and canned/dry goods categories.
Acquisitions added 0.6% to sales growth, while unfavorable currency translation decreased sales by 0.5%. Fourth quarter sales were slightly above the Zacks Consensus Estimate of $11.02 billion.
Adjusted operating income increased 2.2% in the quarter to $608 million.
Other Financial Updates
Cash and cash equivalents were $688.9 million at the end of June 30, 2012 compared with $350.5 million at the end of March 31, 2012. Long-term debt was $2.8 billion versus $2.4 billion at the end of the prior quarter.
Sysco spent $152 million as capital expenditure in the fourth quarter of 2012 related to facility replacements and expansions, replacements to Sysco's fleet, and technology. The company’s capital expenditure included $23 million related to its business transformation projects.
Annual Results
In fiscal 2012, the company witnessed a 7.8% growth in revenue to $42.38 billion, slightly ahead of the Zacks Consensus Estimate of $42.36 billion. Adjusted earnings (excluding one-time items) were $2.13 per share, which breezed past the Zacks Consensus Estimate of $1.93. Earnings rose 4.4% from the prior year.
Our Recommendation
Currently, we have a Neutral recommendation on Sysco Corporation. The stock carries a Zacks #3 Rank (a short-term Hold rating).
We appreciate the company’s strategy of growth through acquisitions and its efforts to reduce cost and improve efficiency. However, we are concerned about rising costs due to fuel price hikes and other inputs which hurt margins.
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