UBS Reiterates Buy Rating on Sysco (SYY)

UBS analyst Mark Carden reiterated a Buy rating and $83.00 price target on Sysco (NYSE: SYY).

The analyst commented, "Our key takeaway from the meetings is that SYY remains focused on controlling the controllables while the macro remains challenging. The co. cited Black Box data, which suggests industry traffic has improved modestly. Still, it remains negative. Despite ~15 months of traffic headwinds (~1% industry volume growth & ~2% inflation is more normal), it believes it's well positioned to improve its share gains. Its salesforce compensation changes had created some short term disruption, and it acknowledged it was late in adding headcount compared with its peers. Still, its new hires (~7% added head count last year, MSD growth going forward) are ramping their productivity curves, and it should see added tailwinds (both top line and margin) from its sales force hires maturing over time (it can take up to 2-3 years for sales hires to fully mature). Further, the co. believes its $100+ mm of cost out initiatives, which touch both COGS and SG&A, can help to support its margins. These efforts include using its scale to improve its strategic sourcing, to lower inbound logistics costs, and to streamline corporate expense. It's also not quite back to 2019 levels for driver & selector productivity. That's an opportunity for it as well. All in, we came away from the meetings with confidence that the distributor looks well positioned for upside when industry traffic improves."

For an analyst ratings summary and ratings history on Sysco click here. For more ratings news on Sysco click here.

Shares of Sysco closed at $73.00 yesterday.

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