Sysco Corporation (NYSE:SYY) last week reported its latest quarterly results, which makes it a good time for investors to dive in and see if the business is performing in line with expectations. It looks like the results were a bit of a negative overall. While revenues of US$15b were in line with analyst predictions, earnings were less than expected, missing estimates by 9.0% to hit US$0.87 per share. 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. So we collected the latest post-earnings consensus estimates to see what could be in store for next year.
Following the latest results, Sysco’s ten analysts are now forecasting revenues of US$62b in 2020. This would be an okay 2.3% improvement in sales compared to the last 12 months. Earnings per share are expected to climb 11% to US$3.66. Yet prior to the latest earnings, analysts had been forecasting revenues of US$62b and earnings per share (EPS) of US$3.76 in 2020. 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 forecasts for next year.
Despite cutting their earnings forecasts, analysts have lifted their price target 5.6% to US$81.08, suggesting that these impacts are not expected to weigh on the stock’s value in the long term. That’s not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. Currently, the most bullish analyst values Sysco at US$94.00 per share, while the most bearish prices it at US$61.00. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Sysco shareholders.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how analyst forecasts compare, both to the Sysco’s past performance and to peers in the same market. It’s pretty clear that analysts expect Sysco’s revenue growth will slow down substantially, with revenues next year expected to grow 2.3%, compared to a historical growth rate of 5.6% over the past five years. Compare this against other companies (with analyst forecasts) in the market, which are in aggregate expected to see revenue growth of 3.8% next year. So it’s pretty clear that, while revenue growth is expected to slow down, analysts also expect the wider market to grow faster than Sysco.
The Bottom Line
The most important thing to take away is that analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. On the plus side, there were no major changes to revenue estimates; although analyst forecasts do imply revenues expected to perform worse than the wider market. There was also a nice increase in the price target, with analysts feeling that the intrinsic value of the business is improving.
With that said, the long-term trajectory of the company’s earnings is a lot more important than next year. We have estimates – from multiple Sysco analysts – going out to 2024, and you can see them free on our platform here.
You can also view our analysis of Sysco’s balance sheet, and whether we think Sysco is carrying too much debt, for free on our platform here.
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