Sysco's Merger Deal With US Foods On Ice As FTC Continues Review
Sysco has been waiting nearly a year since it announced plans to buy US Foods.
And it looks like the food distributor will have to wait a little longer.
Houston-based Sysco (NYSE: SYY) said Monday that it expects the $3.5 billion deal to close next year, since the Federal Trade Commission is still reviewing it.
Sysco and US Foods, which is owned by private equity companies, are the only two food distributors with national reach.
Also on Monday, Sysco reported adjusted fiscal Q1 earnings of 52 cents a share, up 6% from last year and a penny above views - its best quarterly profit growth in three years.
Sales rose 6% to $12.4 billion, also topping forecasts. Sysco's sales growth has come in at 3% or higher the past 13 quarters.
But earnings were flat to down 21% the previous six quarters due to expenses, including higher delivery and merger-related costs. The company said it expects expenses to increase for the fiscal year ending in June, with a bigger year-over-year impact in the current quarter. Analysts see a 13% decline in fiscal Q2 earnings on a 6% sales gain.
Annual EPS fell the past two years, but growth is expected to resume at 4% and 7% in the next two fiscal years.
Sysco pays a quarterly dividend of 29 cents a share, or $1.16 on an annualized basis, for a yield of about 3%, compared with the 1.9% average of the S&P 500. Sysco began paying quarterly dividends in 1970 and has raised its payout for 45 years in a row.
As a result, Sysco is a member of the S&P 500 Dividend Aristocrats, companies that have increased their regular quarterly dividends for 25 consecutive years.
The stock has been consolidating since Dec. 9, when Sysco said it would acquire US Foods. Its pattern looks like a long flat base, but resistance at around 39 can serve as a possible entry point.
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