Sysco (SYY) Cash-Heavy and Growing - Barron's

Sysco Foods, Inc. (NYSE: SYY) is poised to make a big pop in earnings this year, a Barrons article reported today. Sysco is one of the biggest players in the $215 billion food-service industry, and distributes over 400,000 foodstuffs and dining supplies to various customers from restaurants to schools.

About 65% of their profits are expected to be derived from restaurants, and 20% of those results are expected from bigger name fast-food chains.

Sysco shares are believed to be valued at about 10% lower than they should be, and return a 3.7% dividend yield. Typically seeing a 20x multiplier, the current P/E ratio is 14.7 FY10 earnings.

For Q110, Sysco's sales declined 8.1% to $9.1 billion, producing an EPS of $0.46. With unusual items, EPS would have been $0.55/share. Estimates see FY10 EPS of $1.85, up 4.5% from 2009.

Sysco also generates a lot of cash, allowing for nice dividends and the ability to pay down long-term debts.

Though it owns one of the largest private transportation fleets in the world, the company has successfully hedged the cost of about 40% of their fuel needs for FY10.

Since M&A looks slim right now, Sysco's objectives are to increase their sales to top restaurant customers.

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