Food distributor Sysco turns bullish as Q4 EPS tops view

Aided by lower food prices, the food product distributor Sysco Corporation (NYSE: SYY) posted a 10% growth in the fiscal 2016 fourth-quarter revenue, compared to the similar period last year. The earnings also topped the Wall Street estimates by $0.03 per share. Considering the three fold y-o-y increase in the quarterly net earnings, we believe that the share price of Sysco, which closed at $52.09 on Tuesday, would remain bullish.

The Houston, Texas-based company’s fourth-quarter revenue of $13.65 billion was not only in line with the analysts’ estimate, but also above the $12.40 billion revenue reported in the fourth-quarter last year.

It should be noted that the quarter ended July 2, 2016 had 14 weeks, against the 13 weeks in the quarter ended June 27, 2015. On a comparable (13-week) basis, the fourth-quarter’s revenue was $12.67 billion.

Sysco Corporation

The Broadline segment reported 1.5% y-o- y rise in revenue to $10.02 billion. The SYGMA segment posted revenue of $1.53 billion, up 4.5% compared to the similar period last year. Other segment’s revenue grew 6.9% y-o- y to $1.52 billion. The segment revenue for comparable periods (13 weeks) is provided here.

For the fourth-quarter, Sysco reported net earnings of $216.67 million or $0.38 per share, up from $73.03 million or $0.12 per share in the corresponding period of 2015. Excluding items, the adjusted net earnings for the Q4 2016 was $366 million or $0.64 per share, compared to $309 million or $0.52 per share in the Q4 2015. The quarterly adjusted net earnings surpassed the Street’s estimates of $0.61 per share. On a comparable basis (13-weeks), the fourth-quarter adjusted net earnings were $339.55 million or $0.60 per share. Sysco also paid a quarterly dividend of $0.31 per share.

During the fiscal 2016, the operating cash flow increased to $1.93 billion, from $1.56 billion in the full year 2015. The non-GAAP free cash flow for the fiscal 2016 climbed to 1.43 billion, from $1.04 billion in the previous year. Thus, considering the strong rise in the earnings and healthy financial situation, the investors can be expected to push the stock price further upwards.

After consolidating for nearly three months, the stock has broken the resistance of 52. The RSI continues to oscillate in the bullish zone. So, we can expect the stock to rise further. The historic chart indicates that the resistance may arise at 60 levels.

Thus, a one touch call option with a target price of not more than $60 can be bought by a binary trader. To give enough time for the stock to hit or rise above the target level, a mid-September expiry period can be chosen by the binary trader.

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