Sysco Jumps After Earnings Top Estimates, Trian Boosts Stake

  • Food distributor relies on cost cuts to bolster profit
  • Plan to acquire rival was blocked by a judge last year

Sysco Corp. rose as much as 3.4 percent after fourth-quarter profit topped analysts’ estimates and activist investor Trian Fund Management boosted its stake in the food distributor.

Excluding some items, earnings were 64 cents a share in the period, the Houston-based company said in a statement Monday. Analysts had estimated 61 cents on average, according to data compiled by Bloomberg.

The shares climbed as high as $53.97 in New York trading, the biggest intraday increase since May 2. The stock was already up 27 percent this year before the latest gain.

The results followed news on Friday that Trian had increased its investment in Sysco. The investment firm is raising its bet on the company as Trian shifts away from PepsiCo Inc., which it had previously advocated breaking up into two businesses.

Sysco said that keeping a lid on expenses helped bolster profit last quarter, even as sales came in shy of projections. Revenue rose to $13.6 billion in the period, which ended July 2. Analysts had estimated $13.7 billion.

US Foods Deal

Sysco, the largest North American food distributor, has worked to control costs since terminating its $3.5 billion planned takeover of competitor US Foods Inc. last year. After the deal was nixed, Trian disclosed that it had taken a stake in the company, and Nelson Peltz and Josh Frank, two partners at the investment firm, joined Sysco’s board.

Trian has a history of pushing for changes at companies, and it has a fondness for food and beverage giants. In addition to investing in PepsiCo, the firm has taken stakes in Mondelez International Inc., Kraft Foods Inc., H.J. Heinz Co. and Wendy’s Co. When it disclosed its initial stake in Sysco, Trian said the company could improve its operating margins, consider borrowing money to return more capital to shareholders and “better align management compensation with corporate performance.”

Sysco terminated its planned takeover of US Foods after a federal judge blocked the combination. Instead, the company added $3 billion to its stock-buyback program. Sysco also has looked to Europe for growth. In February, it agreed to buy Brakes Group from private equity firm Bain Capital in a $3.1 billion deal.

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