Sysco's (SYY) fiscal Q1 results included some unexpected challenges, but the company's execution remains on track and the recent share price pullback was overdone, UBS Securities said in a note Wednesday.
The company achieved its target local case growth of 2.5%, and has seen growth reacceleration after a slow start for the overall industry in October, according to the note.
Sysco reported fiscal Q1 adjusted earnings Tuesday in line with analyst expectations, while sales missed consensus.
Beyond the core business, investors are likely to focus on the recent case growth slowdown at Restaurant Depot, with Sysco's acquisition expected to close in fiscal Q3. The brokerage views these pressures as temporary and sees underappreciated opportunities for revenue synergies over the long term, the note added.
The company's local case growth was primarily driven by penetration, which is more favorable from a profitability standpoint. The brokerage believes Sysco is benefiting from better sales consultant tenure and retention, along with heavier use of its AI 360 tool.
UBS now estimates fiscal 2027 adjusted EPS of $5.06 and sales of $89.4 billion, compared with its prior expectations of $5 and $89.9 billion, respectively.
UBS kept its buy rating on Sysco with a price target of $95 per share.
Price: 76.56, Change: +2.45, Percent Change: +3.31
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