Sysco Margins Pressured by Mix: Can Strategic Shifts Rebound?

Sysco Corporation SYY experienced margin pressure in the third quarter of fiscal 2025, with gross profit falling 0.8% and gross margin contracting 35 basis points to 18.3%. Despite improved gross profit per case, overall margin was impacted by volume softness and an unfavorable shift in mix, specifically, stronger performance from lower-margin national accounts and reduced penetration of Sysco-branded products.The company cited macroeconomic headwinds and declining restaurant traffic as primary factors behind the volume decline. In addition, national business outpaced local performance during the quarter, further skewing the mix. Strategic sourcing initiatives, expected to bolster gross margin, fell short of internal timelines in the quarter. Fewer deals were finalized than anticipated, due in part to the challenging operating environment. However, management stated that several sourcing agreements closed shortly after quarter-end and are expected to contribute in the near term.Looking ahead, the company expects gross margin improvement supported by recently completed strategic sourcing agreements, which are set to take effect in the near term. These initiatives, part of a broader cost savings program, are anticipated to deliver incremental benefits. In addition, management is focused on improving mix through increased penetration of Sysco-branded products and renewed momentum in the local customer segment, both key to restoring margin quality.The company noted that margin improvement will depend on executing planned cost-efficiency measures and gradually rebalancing its business mix. In a competitive environment with continued customer price sensitivity, aligning internal initiatives with market dynamics will be essential to supporting profitability and offsetting recent margin pressure.Sysco’s Zacks Rank & Share Price PerformanceShares of this Zacks Rank #3 (Hold) company have risen 8.5% in the past three months, outperforming the industry and the broader Consumer Staples sector’s 3.7% and 0.3% decline, respectively. However, the stock underperformed the S&P 500 index, which advanced 16% over the same period.SYY Stock's Past 3-Month PerformanceImage Source: Zacks Investment ResearchClosing the last trading session at $77.46, SYY stock is trading 5.8% below its 52-week high of $82.23 attained on Dec. 6, 2024. Technical indicators show the company’s strong performance. The stock is trading above its 50 and 200-day SMA (simple moving average) of $73.10 and $73.33, respectively, highlighting a continued uptrend. This technical strength, along with sustained momentum, indicates positive market sentiment and investors’ confidence in SYY’s financial health and growth prospects.SYY Trades Above 50 and 200-Day SMAImage Source: Zacks Investment ResearchIs SYY a Value Play Stock?Sysco currently trades at a forward 12-month P/E ratio of 16.44 compared with the industry average of 15.97. This valuation places the stock at a premium relative to peers, reflecting broader market expectations around its business stability and ability to navigate current cost and demand dynamics.SYY P/E Ratio (Forward 12 Months)Image Source: Zacks Investment ResearchSome Solid BetsTreeHouse Foods, Inc. THS manufactures and distributes private-brands snacks and beverages in the United States and internationally and presently flaunts a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. The Zacks Consensus Estimate for TreeHouse Foods’ current financial-year sales indicates growth of 0.4% from the year-ago numbers. THS delivered a trailing four-quarter earnings surprise of 58.8%, on average.Post Holdings, Inc. POST operates as a consumer-packaged goods holding company in the United States and internationally. It currently holds a Zacks Rank of 2 (Buy). POST delivered a trailing four-quarter earnings surprise of 22.9%, on average.The consensus estimate for Post Holdings’ current fiscal-year earnings implies growth of 5.7% from the year-ago figures. BRF S.A. BRFS raises, produces and slaughters poultry and pork for processing, production and sale of fresh meat, processed products, pasta, margarine, pet food and other products. It currently carries a Zacks Rank of 2. BRFS delivered a trailing four-quarter earnings surprise of 5.4%, on average.The Zacks Consensus Estimate for BRF S.A.'s current fiscal-year sales and earnings indicates growth of 11.1% and 8.33%, respectively, from the prior-year levels.#1 Semiconductor Stock to Buy (Not NVDA)The incredible demand for data is fueling the market's next digital gold rush. As data centers continue to be built and constantly upgraded, the companies that provide the hardware for these behemoths will become the NVIDIAs of tomorrow.One under-the-radar chipmaker is uniquely positioned to take advantage of the next growth stage of this market. It specializes in semiconductor products that titans like NVIDIA don't build. It's just beginning to enter the spotlight, which is exactly where you want to be.See This Stock Now for Free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Sysco Corporation (SYY): Free Stock Analysis Report BRF S.A. (BRFS): Free Stock Analysis Report TreeHouse Foods, Inc. (THS): Free Stock Analysis Report Post Holdings, Inc. (POST): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks