Sysco's Q2 Earnings Beat Street View as Operating Income Improves

Sysco Corporation, the world's largest foodservice distribution company, reported its fiscal second-quarter earnings on Tuesday, January 28, 2025. The company's earnings per share (EPS) of $0.82 matched the same period last year, while adjusted EPS increased by 4.5% to $0.93. This performance was in line with Wall Street expectations, with the average estimate of eight analysts surveyed by Zacks Investment Research also predicting EPS of $0.93.

Sysco's revenue for the quarter increased by 4.5% to $20.2 billion, beating the Street's forecast of $20.1 billion. The company's U.S. Foodservice volume grew by 1.4%, while local case volume within U.S. Foodservice decreased by 0.9%. Gross profit increased by 3.9% to $3.7 billion, and gross margin decreased by 11 basis points to 18.1%. Product cost inflation was 2.1% at the enterprise level, primarily affecting dairy and poultry categories.

Sysco's International segment emerged as a standout performer, with a 14.5% increase in operating income and a 26.5% increase in adjusted operating income. The company's specialty offerings continue to win in the marketplace, with total team selling picking up pace and momentum. However, the decline in local case volume indicates challenges in penetrating local markets despite investments in sales professionals.

Sysco maintained its full-year fiscal 2025 guidance, projecting sales growth of 4-5% and adjusted EPS growth of 6-7%. The company also announced an increase in shareholder returns to approximately $2.25 billion for the year, comprising $1.25 billion in share repurchases and $1 billion in dividends. This increase reflects Sysco's strong cash generation capabilities and commitment to rewarding shareholders.

Sysco's Q2 earnings report demonstrates the company's resilience and ability to navigate market challenges. Despite a decline in local case volume, the company's strong performance in the International segment and specialty offerings has helped drive growth. Sysco's commitment to shareholder returns, as evidenced by the increased share repurchase plan, further solidifies the company's position in the market. As Sysco continues to invest in its business and adapt to changing market conditions, investors can expect the company to maintain its competitive edge and deliver on its growth prospects.