Sysco Stock Approaching Fair Value, Says JPMorgan

Sysco Corporation SYY reported a Q4 earnings beat on Monday that saw the stock move higher, but analysts at JPMorgan now feel the stock is approaching fair value.

Sysco reported EPS of $0.64 per share, topping analysts' estimates of $0.61 per share, and same-store sales managed to increase 2.2 percent. A weakening restaurant environment poses well for Sysco, on the conference call the company believes this will lead to "modest growth for the next quarter or two." Sysco's  Costs of Goods Sold (81.7 percent) was the best since Q4 2012.

"This was achieved in part by the company's attempt to protect gross margin $s in the face of deflation but more importantly that a significant amount of the improvement came from initiatives such as category management, revenue management, and sales force tools – indicating trend sustainability," said JPMorgan.

Sysco CEO Bill DeLaney outlined the five P's to success for the company moving forward:

• Partnership with customers
• Productivity improvements in all areas of the business
• Product enhancements through a customer-centric innovation program
• People to drive performance
• Portfolio assessment including new market opportunities and current business performance

JPMorgan is Neutral on the stock with a $57 price target.