Sysco Corporation (NYSE:SYY) just released its latest second-quarter report and things are not looking great. It wasn't a great result overall - while revenue fell marginally short of analyst estimates at US$12b, statutory earnings missed forecasts by an incredible 60%, coming in at just US$0.13 per share. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
Taking into account the latest results, the consensus forecast from Sysco's ten analysts is for revenues of US$50.3b in 2021, which would reflect a notable 9.6% improvement in sales compared to the last 12 months. Sysco is also expected to turn profitable, with statutory earnings of US$1.69 per share. In the lead-up to this report, the analysts had been modelling revenues of US$51.2b and earnings per share (EPS) of US$1.88 in 2021. The analysts seem to have become a little more negative on the business after the latest results, given the small dip in their earnings per share numbers for next year.
The consensus price target held steady at US$76.20, with the analysts seemingly voting that their lower forecast earnings are not expected to lead to a lower stock price in the foreseeable future. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on Sysco, with the most bullish analyst valuing it at US$89.00 and the most bearish at US$54.00 per share. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.
Of course, another way to look at these forecasts is to place them into context against the industry itself. It's clear from the latest estimates that Sysco's rate of growth is expected to accelerate meaningfully, with the forecast 9.6% revenue growth noticeably faster than its historical growth of 1.5%p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 3.8% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Sysco to grow faster than the wider industry.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Sysco. Fortunately, they also reconfirmed their revenue numbers, suggesting sales are tracking in line with expectations - and our data suggests that revenues are expected to grow faster than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for Sysco going out to 2025, and you can see them free on our platform here..
We don't want to rain on the parade too much, but we did also find 3 warning signs for Sysco (1 is potentially serious!) that you need to be mindful of.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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