Diversified

Sysco (SYY) Looks Well Poised on Diversified Business Lines

Sysco Corporation SYY looks well poised, courtesy of its growth initiatives and efforts to stay firm amid the coronavirus outbreak. The company, whose food-away-from-home business has been challenged amid the pandemic, is focused on aiding revenues through other channels. Also, the company is undertaking measures to preserve liquidity amid the crisis.

In fact, at a juncture where many companies are suspending dividend payments, Sysco declared a quarterly dividend of 45 cents per share last month, which reflects its healthy financial position and commitment to shareholders. Shares of this Zacks Rank #3 (Hold) company have rallied 31% in the past three months compared with the industry’s growth of 25.8%. In fact, Sysco has gained 15.6% in a month’s time.

Focus on Alternate Opportunities Amid Crisis

Sysco serves a wide spectrum of the foodservice space, with about half of the consumption coming from the away-from-home channel in the United States. We note that Sysco’s U.S. Foodservice and International Foodservice segments were hurt by coronavirus-related hurdles in the third quarter of fiscal 2020. Lower volumes in the food-away-from-home channel have been a deterrent. Increased social distancing had a considerable adverse impact on the company’s restaurant, education and hospitality customer segments. Volumes in the food-away-from-home channel are likely to remain soft.

To keep its revenues flowing, Sysco has turned its distribution model to areas it didn’t essentially cater to before the pandemic. These include grocers, retailers and supply-chain contracts. Incidentally, the company is working with some of the best retailers to address customers’ needs

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