Moody’s analyst Charlie O’Shea said that the latest results show that Sysco “continues to demonstrate that there are no ‘hangover’ effects from the termination of its acquisition of US Foods”
INVESTORS FIND APPETITE FOR SYSCO AFTER SHRUGGING OFF NO-DEAL ‘HANGOVER’
Sysco shares rallied yesterday after the largest food manufacturer and distributor in the US reported better than expected profits in its fiscal fourth quarter. The Houston-based company said profits nearly tripled to $215.7m, or 38 cents a share, compared with $73m, or 12 cents a share, in the year ago quarter. Adjusting for one-time items, earnings of 64 cents a share topped analysts’ estimates. Sysco, which abandoned its $8.2bn takeover of rival US Foods last year but closed a $3.1bn acquisition of UK distributor Brakes last month, said sales rose 10 per cent to $13.6bn but were just shy of analysts’ expectations. Moody’s analyst Charlie O’Shea said that the latest results show that Sysco “continues to demonstrate that there are no ‘hangover’ effects from the termination of its acquisition of US Foods”. He added: “Share repurchases are proceeding with the levels and cadence we expected, and now that the Brakes acquisition has closed, Sysco will focus at least some of its sights on the challenging European market.” A separate filing from Trian Fund Management late on Friday showed that the activist investor co-founded by Nelson Peltz - also the company’s largest shareholder - had boosted its stake in Sysco to 43.97m shares at the end of the second quarter, up from 43.27m at the end of the first. Shares in Sysco, which have advanced 29 per cent so far this year, climbed as much as 3.4 per cent to $53.97. Elsewhere, Best Buy shares slipped after Jefferies cut its rating on the stock to “hold” from “buy”. The electronics retailer may struggle as the market for 4K televisions, which offer ultra-high definition video, reaches its maturation point, said analyst Daniel Binder. “[The] 4K TV product is getting commoditised more this year as prices drop and we see a significant step-up in the 4K TV assortments at mass merchants such as Walmart and Target,” Mr Binder said. Best Buy shares fell as much as 2.2 per cent to $34.10 yesterday, but still up by more than 7 per cent over 12 months. At midday, the broader US equity markets were in the green, with the S&P 500, Dow and Nasdaq all building on last week’s record peaks. The S&P 500 rose by 0.4 per cent to 2,192.6, the Dow Jones Industrial Average climbed 0.5 per cent to 18,665.2 and the Nasdaq Composite advanced by 0.6 per cent to 5,263.8. Trading may be “relatively quiet” this week with “major economic releases for the month and the earnings season largely behind us,” said David Kelly, at JPMorgan Funds. Mr Kelly added that many investors are looking ahead to comments later this month from Fed chief Janet Yellen at the annual economic symposium at Jackson Hole.