Investors Increasingly Confident Sysco Can Deliver On Its 3-Year Plan

Barclays expressed confidence that Sysco Corp SYY could deliver its three-year plan. The comments come on the back of the company delivering better than expected results for the first quarter. The firm upgraded the stock from Underweight to Equal-Weight rating and boosted the price target from $48 to $53.

Analysts Karen Short and Ryan Gilligan cited the following three key factors behind upgrading the stock:

• Increasing EPS estimate of $2.45 for fiscal year 2017 following the 8.1 percent growth in sales and EBIT margin expansions of 30 basis points on a year-over-year basis.
• First quarter results reflected conservatism to the company’s forecast thus boosting the confidence that Sysco could deliver even in a tough environment.
• Upside in Brakes is more meaningful than predicted. The fragmented European market could use it as a platform for additional deals.

“While many of the potential headwinds we outlined in our initiation (slowing restaurant sales, moderating deflation GPM tailwind, rising fuel prices) are still a factor, our upside/downside analysis has changed given our higher estimates (note we use the same multiples). Specifically, we see upside to $57 (+6% upside, 60% probability, ~12x CY17 EV/EBITDA) if execution remains strong,” the brokerage told its clients in a research note.

At last check, the stock fell 3.12 percent to $52.50.