Wednesday, November 09, 2011

Sysco (SYY) 2011 Review

Sysco (SYY) Corp markets and distributes fresh, frozen and specialty meats, seafood, poultry, fruits and vegetables, bakery products, canned and dry foods, dairy foods, beverages, kitchen and tabletop equipment, paper and disposable products, sanitation items and hotel operating supplies to more than 400,000 restaurants, healthcare and educational facilities, lodging establishments and other food service customers.

It achieved a 13-17% growth in profits and dividends over the last 10 years earning an almost 30% return on equity. The economic down turn modestly impacted Sysco’s profitability as restaurant sales declined and bad debt expenses increased. The company has recovered as it:

(1) is benefiting from increased volume,

(2) improves its business services division by offering a fresh online order management system, implement new programs designed improve trailers loadings, automatically scan orders and manage fleet maintenance,

(3) expands a new business development program which provides a comprehensive analysis of a restaurant’s business that is designed to assist them achieve operational excellence,

(4) utilizes its impressive cash flow to buy back stock and reduce debt.


(1) higher food commodity and fuel prices negatively impact margins,

(2) a large portion of its business is with the restaurant industry which is dependent on improving consumer discretionary spending.

SYY is rated A++ by Value Line, carries a 40% debt to equity ratio and its stock yields 3.7%

Statistical Summary

Stock YieldDividend Growth RatePayout Ratio # Increases Since 2001

Debt/EquityROEEPS Down Since 2001 Net MarginValue Line Rating


Note: SYY stock made good initial progress off its March 2009 low, quickly surpassing the down trend off its September 2008 high (straight red line) and the November 2008 trading high (green line). Sysco is in both a long term trading range (blue lines) and an intermediate term trading range (the purple line is the lower boundary and the upper blue line is the upper boundary). The wiggly red line is the 30 day moving average. The Aggressive Growth and the High Yield Portfolios own a 30% position in SYY by virtue of having made a trading Sale ($26) in the recent October decline (clearly not the best trade). The upper boundary of SYY’s current Buy Value Range is $20 and the lower boundary of its Sell Half Range is $30.