Consumer spending in the U.S. has been increasing. It has reached an average daily high of $98. This shows that people are willing to spend, especially because of the peak holiday season, which ended recently. This uptrend has enabled companies to attract more customers and boost its results.
Therefore, there is a host of companies which are witnessing growing sales and registering great results recently. Sysco Corporation (SYY, Financial) is a specialty food retailer, which has been performing well for quite some time now. Its shares have risen 10% in the last year. Also, it registered great fourth quarter results recently, wherein the numbers were ahead of the Street’s estimates. This results in a rise in its share price. Let us dig in deeper.
The key drivers of the quarter
Revenue for the quarter grew 6.2% to $12.45 billion, over last year. It was higher than the analysts’ estimate of $12.36 billion. The top line was driven by a 2.3% growth in volumes, as more and more customers got attracted to its products. Along with growth in volumes, sales were driven by the acquisitions made by the company in the last few years. Acquisitions contributed 0.6% to the increase in revenue.
Factors such as unfavorable currency fluctuations of 0.7% and an increase in input cost, affected the margins of the company. The gross margin of the company declined 4 basis points to 17.6%, as compared to the previous year.
The bottom line of the company also grew during the period. Adjusted earnings surged 6.1% to $0.52 per share, higher than the analysts’ estimate of $0.50 per share. Although higher costs affected the earnings, improvement in sales offset the decline, resulting in growth.
As against the peers
Peer United Natural Foods (UNFI, Financial) has also undertaken the path of acquisition in order to grow. It bought Tony’s Fine Foods in July 2014 in order to expand its business. This new addition to the business helped United Natural offer natural protein and perishable products. Also, it helped in boosting both the top line and the bottom line of the company, which beat the analysts’ expectations in the last reported quarter. Revenue surged 24.4%, whereas earnings beat the estimates by $0.03 per share.
Some points to note
Sysco Corporation expects to increase its productivity in the future, which will help its business grow. It had acquired Keelings Foods in October 2012, which helped in adding more customers and boosting the revenue of the company.
Further, the food retailer plans to acquire US Foods for $8.2 billion in the coming months. The buyout was announced in December 2013 and the resultant deal will make Sysco one of the largest food retailers in the U.S. Moreover, it will help in expanding the size of the business.
Finishing thoughts
Thus, Sysco Corporation is performing well, owing to its efforts of acquiring new businesses as well as expanding the existing one. Furthermore, the company is expected to grow at a CAGR of 7.05% in the next five years. These factors, along with the benefits of the acquisitions, make Sysco a desirable pick. In addition, the potential buyout of US Foods will add to its portfolio attractiveness.
