Betting On The End Of The Sysco Skid

By Gene G. Marcial

Empty-Larder Days
Since late April, shares of Sysco (SYY ), No. 1 marketer of food service products such as vegetables, meats, and kitchen supplies to more than 420,000 customers in the U.S. and Canada, have fallen from 40 to 30. The sharp rise in oil prices has jacked up the costs for operating its fleet of 8,500 trucks. Also, demand for its products has weakened due to slow traffic at major customers -- mainly restaurants and hotels. But the stock's drop has enticed some value players. Richard Steinberg of Steinberg Global Asset Management, who bought shares, says that as the dominant player in the industry, Sysco has "demonstrated over the years above-average growth and earnings consistency." The stock will easily reach 40 or more, he says -- when the economy turns up and oil prices ease. He figures Sysco will earn $1.54 a share in fiscal 2005 ending June 30 and $1.75 in fiscal 2006, vs. 2003's $1.37. Andrew Wolf of BB&T Capital Markets says the near term will be tough, but he thinks the stock, which he rates hold, is fairly valued for long-term investors.

Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.

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