SYY Q2 Earnings Top Estimates on Margin Strength & Local Volume Growth

Core Insights - Sysco Corporation (SYY) reported strong second-quarter fiscal 2026 results, with both revenue and earnings increasing year over year, surpassing the Zacks Consensus Estimate, driven by improving volume trends and margin expansion [1][9] Financial Performance - Adjusted earnings per share were 99 cents, exceeding the Zacks Consensus Estimate of 98 cents, marking a 6.5% increase year over year [2] - Total sales reached $20.8 billion, a 3% year-over-year increase, nearly matching the Zacks Consensus Estimate of $20.81 billion, with foreign exchange movements contributing 0.7% to sales growth [3] - Gross profit rose 3.9% to $3.8 billion, with gross margin improving by 15 basis points to 18.3%, driven by pricing actions and sourcing initiatives [4] - Operating expenses increased by 5.5% year over year to $3.1 billion, leading to a 2.8% decline in operating income to $692 million, while adjusted operating income increased by 3.1% to $807 million [5] Segment Performance - U.S. Foodservice Operations saw sales increase by 2.4% year over year to $14.4 billion, with local case volume improving by 1.2% [6] - International Foodservice Operations reported a 7.3% year-over-year sales increase to $4 billion, with adjusted operating income surging 25.6% to $162 million [7][8] - The SYGMA segment's sales edged up 0.5% year over year to $2.1 billion, with operating income improving by 10.5% [8] - The Other segment experienced a sales decline of 3.4% year over year to $254 million, although operating income improved modestly [10] Financial Health - Sysco ended the quarter with $1.2 billion in cash and cash equivalents, and total liquidity of $2.9 billion, generating $611 million in operating cash flow and $413 million in free cash flow during the first half of fiscal 2026 [11] - Capital expenditures totaled $198 million for the first 26 weeks of fiscal 2026, with $518 million returned to shareholders through dividends [12] Future Outlook - Management expects adjusted earnings per share for fiscal 2026 to be at the high end of the previously issued guidance range of $4.50-$4.60, despite an approximate $100 million adverse effect from incentive compensation comparisons [13]