With the market in a correction, leading food distributor Sysco is trying to serve up a move into a fresh buy zone. SYY stock has also prepared itself a seat at the IBD Breakout Stocks Index table.
Sysco earns top billing in the wholesale food industry group, scoring a 97 Composite Rating. Fellow top food distributors, which also all earn strong ratings in Stock Checkup, include Performance Food Group and U.S. Foods. But not immune to the general market downturn, each stock ran into selling pressure on Tuesday.
All three stocks have been setting up new chart patterns as each gets ready to report earnings next month. First up is Performance Food, which reports on May 5. Sysco is next, with fiscal 2022 Q3 numbers scheduled for May 10, followed by U.S. Foods' report on May 12.
Earnings have been strong for all three food distributors in recent quarters.
After posting 235% EPS growth last quarter, analysts expect Sysco to deliver a 150% increase next month and a 114% rise for the full fiscal year.
Analysts see Performance Food more than doubling its earnings from 63% growth last quarter to a 174% spike when it reports in May. U.S. Food is expected to trim down from a 200% gain last quarter to a 16% rise in its upcoming earnings report.
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Sysco Among Top Dividend Stocks To Watch
Sysco is a global leader in selling, marketing and distributing food products. Client industries include restaurants, health care and educational facilities, lodging establishments and other customers who prepare meals away from home. Its family of products also includes equipment and supplies for the food service and hospitality industries.
Based in Houston, Sysco has over 58,000 employees and operates 343 distribution facilities worldwide. The food distributor serves more than 650,000 customer locations. In fiscal 2021 (ended July 3, 2021), Sysco generated sales of more than $51 billion.
While food distribution peers U.S. Food and Performance Food Group do not pay a dividend, Sysco is among the leading dividend stocks to watch. The company pays a dividend currently yielding 2.1% on an annualized basis.
Hoping that more engagement with women-owned restaurants will pay dividends for the industry and everyone involved, last month Sysco participated in celebrating International Women's Day, sponsoring the Let's Talk Womxn's Let's Talk Change Virtual Summit. Let's Talk Womxn is a collaboration of women restaurant owners to learn from and support each other.
SYY Stock Tests Buy Zone
With its relative strength line trending higher, Sysco cleared an 89.32 buy point last week. While volume on April 21 was 28% higher than normal, trade has generally been below average in recent days.
SYY stock has felt the pressure from selling in the market indexes, retreating below the entry in its breakout attempt. While Sysco has pulled back, the RS line remains right around the old high, showing that SYY stock has performed well compared with the rest of the market.
Showing the strength of Sysco and its fellow food distributors, SYY stock and U.S. Food trade above their 50-day moving averages. Performance Food Group slipped below that line, but came off its lows Wednesday to close right around that benchmark.
Unlike many stocks during this market downturn, the 50-day line for all three stocks remains solidly above the longer-term 200-day benchmark.
With an eye on earnings and the general market, see if Sysco can continue to show resilience and retake its earlier buy point in strong volume. On Wednesday, SYY stock closed fractionally higher briefly nearing the original entry.
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Follow Matthew Galgani on Twitter at @IBD_MGalgani.
