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Sysco Shares Worth 10 Percent More

(Dec. 3, 2009 - Barron's)—Though North American consumers are expected to spend less of their food budget on meals at restaurants due to the poor economy, Sysco could still benefit as it puts focus on reducing its costs of providing food services to the recession-resistant fast food industry.

After 5 years of challenges and the company's cost cutting focus, the stock could rise 50% in the next few years, says Barron's, and may also be helped by consolidation in the food services industry.

Barron’s says that SYY shares, which closed on Friday at $26.83, are priced about 10% lower than they should be.

The company’s prospects for growth hinge upon higher sales to its restaurant customers, which make up about 65% of its profits. The article also points out that Sysco generates plenty of cash, which enables it to pay down debt and continue to steadily raise its dividend, which currently sits at $1 on an annualized basis.

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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