Pounding the Tables for Sysco

Barron’s has nice things to say about Sysco (SYY), one of our Buy List stocks:

There’s no doubt that Sysco, the nation’s largest foodservice distributor, is facing tough times as cash-strapped consumers cut back on visits to restaurants, the company’s biggest customer.
However, management has been able to pare expenses successfully — Sysco actually beat analysts’ estimates last month on cost-cutting measures — leaving it with a growing dividend, currently yielding 4.2%, and plenty of free cash. Also, as smaller rivals struggle, Sysco, with its heft, can more easily steal market share and buy troubled competitors.
“It’s happened before; they come out stronger after a recession and pick up new customers,” says BB&T analyst Andrew Wolf. “Though this environment is really unprecedented, they have very strong free cash flow and operating culture to manage through this.”
Indeed, the company has outperformed its peers in the last year. The stock lost 23% in the past 12 months, about half the 41.8% loss seen by the broader market, and ahead of its rivals tracked by the Dow Jones Food Retailer & Wholesalers Index, down 28.5%.
With a forward price-to-earnings multiple of 12.5, near its historic lows, this is an excellent time for investors to get into this industry-leading “best of class” company, as Wolf calls it.

Posted by on March 25th, 2009 at 8:41 am


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