Sysco Stock Soars as Earnings Beat Estimates on Sales Growth, Positive Operating Leverage

Shares of Sysco Corp. (SYY) were sharply higher in early afternoon trading Tuesday after the biggest food distributor to restaurants in the U.S. posted better-than-expected profit on higher volumes and positive operating leverage.

Sysco reported that second-quarter fiscal 2024 earnings were up 4.9% to $3.51 billion, or 89 cents per share, beating estimates. Revenue rose 3.7% to $19.29 billion, basically in line with forecasts.  

Chief Executive Officer Kevin Hourican said in the earnings release Tuesday that the increases in profit and sales were driven by “sequential improvements in volume growth, including local performance, as well as supply-chain productivity and implementation of structural cost-out actions.” He also cited “positive operating leverage, as we continue to effectively manage margins.”

Sales at the company’s U.S. Foodservice Operations unit were up 3.2% to $13.5 billion, with total case volume higher by 3.4%. International Foodservice Operations division sales jumped 9.6% to $3.6 billion, helped by favorable foreign exchange rates.

Sysco’s product costs climbed just 1.1%, and its gross margin rose by 21 basis points (bps) to 18.2%.

Chief Financial Officer Kenny Cheung explained that the “positive momentum” the company had through the first half of its fiscal year gave it confidence to reiterate full-year guidance of “mid-single-digit” percent sales growth and earnings of $4.20 to $4.40 per share.

Sysco shares were up 7.4% to $80.74 at around 2:50 p.m. ET, trading at their highest level in more than a year.