Sysco (NYSE:SYY) Reports Q3 CY2025 In Line With Expectations

Food distribution giant Sysco (NYSE:SYY) met Wall Streets revenue expectations in Q3 CY2025, with sales up 3.2% year on year to $21.15 billion. Its non-GAAP profit of $1.15 per share was 2.6% above analysts’ consensus estimates.

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Company Overview

Powering more than 730,000 commercial kitchens across North America and Europe, Sysco (NYSE:SYY) is a global food distributor that supplies restaurants, healthcare facilities, schools, hotels, and other foodservice establishments with food products and related services.

Revenue Growth

A company’s long-term performance is an indicator of its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Over the last five years, Sysco grew its sales at a 10.7% annual rate. Although this growth is acceptable on an absolute basis, it fell short of our standards for the consumer discretionary sector, which enjoys a number of secular tailwinds.

Long-term growth is the most important, but within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends and consumer preferences. Sysco’s recent performance shows its demand has slowed as its annualized revenue growth of 3.3% over the last two years was below its five-year trend.

We can dig further into the company’s revenue dynamics by analyzing its number of units sold. Over the last two years, Sysco’s units sold averaged 1.4% year-on-year growth. Because this number is lower than its revenue growth, we can see the company benefited from price increases.

This quarter, Sysco grew its revenue by 3.2% year on year, and its $21.15 billion of revenue was in line with Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 4.1% over the next 12 months, similar to its two-year rate. This projection doesn't excite us and suggests its newer products and services will not lead to better top-line performance yet.

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Operating Margin

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

Sysco’s operating margin might fluctuated slightly over the last 12 months but has generally stayed the same, averaging 3.9% over the last two years. This profitability was inadequate for a consumer discretionary business and caused by its suboptimal cost structure.

In Q3, Sysco generated an operating margin profit margin of 3.8%, in line with the same quarter last year. This indicates the company’s overall cost structure has been relatively stable.

Earnings Per Share

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Sysco’s EPS grew at an unimpressive 27.3% compounded annual growth rate over the last five years. This performance was better than its flat revenue but doesn’t tell us much about its business quality because its operating margin didn’t improve.

In Q3, Sysco reported adjusted EPS of $1.15, up from $1.09 in the same quarter last year. This print beat analysts’ estimates by 2.6%. Over the next 12 months, Wall Street expects Sysco’s full-year EPS of $4.52 to grow 2.7%.

Key Takeaways from Sysco’s Q3 Results

We struggled to find many positives in these results. Overall, this was a weaker quarter. The stock remained flat at $79.18 immediately following the results.

Is Sysco an attractive investment opportunity right now? We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here (it’s free).