UPDATE: UBS Starts Sysco (SYY) at Buy
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UBS analyst Mark Carden initiates coverage on Sysco (NYSE: SYY) with a Buy rating and a price target of $89.00.
The analyst comments "We initiate coverage of SYY with a Buy rating driven by four key elements: balance sheet strength, strategic initiatives, recovery tailwinds, & share gains. SYY is leaning into its balance sheet ($7.2 bn in cash & available liquidity) to take aggressive organic actions and "win" the recovery (e.g. hiring 6k+ new associates, pre-positioning inventory, maintaining daily deliveries, eliminating order minimums). We believe offering this kind of flexibility will prove to be increasingly important to restaurants experiencing COVID- related stresses, particularly at the local (independent) level, and that the benefits to SYY are underappreciated: our analysis shows that every 10% gain in US local customer penetration (at 30% wallet share) could add ~3.0% to its US sales & ~2.5% overall. Plus, while some near-term headwinds remain, the co's Int'l & Travel / Leisure / Retail businesses provide exposure to segments that should grow faster than the overall business post COVID as demand picks back up. In all, we see SYY's actions helping it bring its market share up to 17.0% by CY'23, a 130 bp improvement vs. CY'19. Currently, SYY trades in line with its 5 yr avg and at a 2x-3x premium to PFGC & USFD. We believe its scale, growth outlook, & ROIC advantage justify this premium valuation."
Shares of Sysco closed at $73.65 yesterday.
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