Pali Research Initiates Coverage with on Sysco (SYY) with a Buy

May 27, 2009 11:19 AM EDT

Pali Research initiates coverage with on Sysco (NYSE: SYY) with a Buy. Price target $28.

We believe the current price of SYY affords an attractive entry-point in an industry leader. We view SYY as a core holding that offers attractive, but measured, returns over a longer-term horizon. In addition with roughly 4.2% dividend yield, we believe investors are rewarded while they wait...Acquisition market likely heats up as economy languishes. Historically, SYY has been highly successful in rolling up independent regional distributors; however, acquisition opportunities dried during 2006 and 2007 due to private equity fueled mania. However, the collapse of the credit markets combined with a weak macro
and consumer environment, should lead to a more favorable acquisition market, in our view...Our $28.00 target prices equates to 15x our $1.85 2010 EPS estimate and represents an 8.0 EV/EBITDA multiple on our 2010 estimate of $2,310M. Further, we believe Street estimates will likely prove too low as they seem to be forecasting sustained sales pressure (overly pessimistic) and continued COLI issues (for the most part over, drag to P&L concluding this quarter, in our opinion)."

To see more analyst ratings on SYY Click Here.
Sysco Corporation, along with its subsidiaries and divisions, is a North American distributor of food and related products primarily to the foodservice or food-prepared-away-from-home industry.

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