Why Sysco Stock Surged Today
Key Points
Sysco's profit margins are rising even as it faces higher food costs.
Management sees accelerating growth in the second half of fiscal 2026.
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Shares of Sysco (NYSE: SYY) popped on Tuesday after the food distributor said its full-year profits would come in near the top of its forecast.
By the close of trading, Sysco's stock price was up more than 10%.
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Solid performance in a challenging economic environment
Sysco's sales rose 3% year over year to $20.8 billion in the quarter ended Dec. 27.
The food giant's gross profit, in turn, grew 3.9% to $3.8 billion, as its gross margin improved by 15 basis points to 18.3%. These gains were particularly impressive, given that Sysco saw its product costs rise by 2.9%, primarily due to higher meat and seafood prices.
Better still, Sysco's U.S. foodservice business returned to growth, with local volumes up 1.2%, even as fewer people dined at restaurants.
"We delivered our third consecutive quarter of sequentially improving local case growth," CEO Kevin Hourican said in a press release.
All told, Sysco's adjusted net earnings increased 3.9% to $476 million. Its adjusted earnings per share, which were boosted by stock buybacks, climbed 6.5% to $0.99.
Growth is set to accelerate
Sysco expects its local case growth to rise to at least 2.5% in the second half of its fiscal year.
Management thus sees the company's full-year adjusted earnings coming in near the high end of its prior forecast of $4.50 to $4.60 per share. That would represent year-over-year growth of up to 7%.
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Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Sysco. The Motley Fool has a disclosure policy.
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