Sysco Climbs Most in Almost Three Years; CEO Pursuing Deals
Sysco Corp. (SYY), the biggest North American distributor of food to restaurants, rose the most since 2008 after sales beat projections and Chief Executive Officer William DeLaney said he’s focused on acquisitions.
Sysco said today that sales in the third quarter ended April 2 rose to $9.8 billion, beating the $9.5 billion average of estimates compiled by Bloomberg. Purchases helped increase revenue 0.6 percent, the Houston-based company said.
“We are also committed to looking for acquisition opportunities both in and beyond the core,” DeLaney said on a conference call today. “We are doing this mainly through building a pipeline of high-quality potential domestic acquisitions and also by looking at adjacencies and new geographies.”
Sysco, which controls almost one-fifth of the restaurant- distribution industry’s more than $200 billion in sales, may look to Western Europe for growth as people there eat out more, said Jack Russo, an analyst at Edward Jones. Sysco has completed at least seven acquisitions in the past five years, the latest being the purchase of Nebraskan distributor Lincoln Poultry & Egg Co. last year.
Sysco climbed $3.06, or 11 percent, to $31.57 at 4 p.m. in New York Stock Exchange composite trading. The gain was the biggest since October 2008.
The company was founded more than forty years ago by John Baugh and the owners of eight other U.S. wholesalers, according to Hoover’s Inc. Sysco supplies customers with produce, meat and kitchen gear, competing with distributors such as Royal Ahold NV’s U.S. Foodservice and Performance Food Group Co., taken private in 2008 by Blackstone Group LP. (BX)
In the U.S., Sysco may look to Phoenix’s Shamrock Foods, Gordon Food Service in Grand Rapids, Michigan, and Reyes Holdings LLC’s Reinhart Foodservice, said Russo, who is based in St. Louis and rates the shares a buy.
“Gordon is and intends to remain a family owned and operated company,” Deb Abraham, a spokeswoman for the company, said in an interview. Representatives from Shamrock and Reyes didn’t return calls seeking comment.
The past year has yielded more than 300 food-company takeovers globally, according to data compiled by Bloomberg. Among the latest bids is ConAgra Foods Inc.’s $4.9 billion offer last week for Ralcorp Holdings Inc. (RAH), the maker of Post cereals and store-brand foods.
Some are consolidating as they face increasing costs for raw ingredients such as milk and wheat. Sugar, for example, has climbed about 50 percent over the past 12 months. Sysco said today that it passed on price hikes to customers after prices for meat, seafood and other items surged.
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