It has been about a month since the last earnings report for Sysco (SYY). Shares have lost about 0.3% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Sysco due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Sysco Q2 Earnings Top Estimates, Volume Gains a Driver

Sysco Corporation reported second-quarter fiscal 2024 results, with the top and the bottom line increasing year over year. Earnings surpassed the Zacks Consensus Estimate, while sales missed the same. Results were backed by improvements in volume growth, supply chain productivity and efficient implementation of structural cost-out action.

For fiscal 2024, management still envisions sales to increase in the mid-single digits to roughly $80 billion. Adjusted earnings per share or EPS are expected to grow 5-10% to the $4.20-$4.40 band.

Quarter in Detail

Sysco’s adjusted earnings of 89 cents per share surpassed the Zacks Consensus Estimate of 88 cents. The bottom line rose 11.3% from the year-ago quarter’s figure.

The global food product maker and distributor reported sales of $19,287.9 million, which jumped 3.7% year over year, though it fell short of the Zacks Consensus Estimate of $19,295.4 million. Sales growth was driven by improving volumes and favorable operating leverage.

The gross profit jumped 4.9% to $3,513.6 million and the gross margin expanded 21 basis points (bps) to 18.2%. The upside was mainly driven by elevated volumes, efficient product cost inflation management and progress in the company’s strategic sourcing efforts.

SYY witnessed product cost inflation of 1.1%, measured by the estimated change in product costs, mainly in the meat and frozen categories.

Operating expenses rose 3.9% year over year due to cost inflation and increased volumes. These were somewhat offset by greater productivity. Adjusted operating expenses rose 3.8% year over year. The adjusted operating income of $744.9 million increased 9.2% from the year-ago period’s levels. The adjusted operating margin increased 19 bps to 3.9%.

Segment Details

U.S. Foodservice Operations: In the reported quarter, sales rose 3.2% to $13,494.4 million. The upside can be attributed to improved volumes and effective margin management. Local case volumes within U.S. Foodservice grew 2.9%, while total case volumes within U.S. Foodservice increased 3.4%.

International Foodservice Operations: The segment’s sales advanced 9.6% to $3,596.5 million in the quarter. Foreign exchange fluctuations positively impacted the segment’s sales by 3.2%. On a constant-currency (cc) basis, sales advanced 6.4%.  

SYGMA’s sales declined 1% to $1,913.7 million.

Meanwhile, the Other segment’s sales declined 5.9% to $283.3 million.