Sysco Earnings: Macro Headwinds Limit Near-Term Margin Recapture; Shares Fairly Priced

Narrow-moat Sysco reported fiscal full-year results in line with our expectations, with $76.3 billion in sales and $3.47 in GAAP EPS ($4.01 non-GAAP) aligning closely with our $76.7 billion and $3.51 ($3.98) estimates, respectively. Despite deflationary food costs in many categories within the U.S. broadline business, the foodservice distributor grew its gross profit margin and gross profit per case on an annual basis, with improvements to its pricing tool permitting the operator to navigate an unprecedented period of input cost volatility. After digesting results, we expect to lower our $78 fair value estimate by a low-single-digit percentage, with a slower-than-anticipated margin recovery over the next couple of years offset by time value.