Sysco Corporation shares are up more than 7% YTD. Should I invest?

By: Stanko Iliev
Stanko Iliev
Stanko dedicates himself to providing investors with relevant information they can use to make investment decisions. He loves the… read more.
on Mar 20, 2021
  • Sysco shares have advanced more than 7% since the beginning of January 2021
  • Sysco reported weaker than expected FQ2 results last month
  • Sysco is a risky investment at the current price

Sysco Corporation (NYSE: SYY) shares have advanced more than 7% since the beginning of January 2021, and the current share price stands around $79. Sysco Corporation continues to expand its business, but with the expected continued headwinds, this is a risky investment at the current share price.

Fundamental analysis: Sysco reported weaker than expected FQ2 results

Sysco Corporation is an American multinational corporation that distributes food products and kitchen equipment in more than 90 different countries worldwide. The Covid-19 pandemic continues to impacts the company’s business, and Sysco reported weaker than expected FQ2 results last month.

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Total revenue has decreased by -23.1% Y/Y to $11.56B while FQ2 GAAP EPS was $0.13 (missed by $0.19). Total revenue has decreased above expectations (-$740 million), but the board of directors reported that during the second quarter, Sysco gained overall market share versus the rest of the industry.

“We continued to win meaningful business in the national account space and signed an incremental $200 million of net new business in the quarter, which totals more than $1.5 billion of net new contracting business since the start of the pandemic. Additionally, throughout the second quarter, we began making investments in preparation for the business recovery that we believe will begin in the calendar year 2021,” said Kevin Hourican, President and CEO of Sysco Corporation.

The positive news is that Sysco reported last week that it had reduced its outstanding debt by a total of $1.1B. Sysco Corporation declared a $0.45/quarterly share dividend which will be payable on April 23, while the ex-dividend day is on March 31.

With the market capitalization of $40.2B, this stock is not undervalued, the company’s business remains under pressure, and maybe it is not the right moment for investing in Sysco Corporation shares.

Technical analysis: The risk/reward ratio is not good enough for “value” investors

Technically looking, Sysco Corporation shares could advance above the current price levels this March, but the risk/reward ratio is not good enough for “value” investors. Sysco shares are trading at pre-pandemic levels, and with the expected continued headwinds, this is a risky investment at the current price.

Data source: tradingview.com

If the price jumps above $85, it would be a signal to trade shares, and the next target could be around $90, but if the price falls below the $70 support level, it would be a firm “sell” signal.

Summary

Sysco Corporation continues to expand its business, but with the expected continued headwinds, this is a risky investment at the current share price. Sysco reported weaker than expected FQ2 results last month, total revenue has decreased by -23.1%, but the company gained overall market share versus the rest of the industry.

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