Sign in
SC

SYSCO CORP (SYY)·Q1 2026 Earnings Summary

Executive Summary

  • Q1 FY26 delivered modest top-line growth and solid margin management: sales $21.1B (+3.2% YoY), gross margin +13 bps to 18.5%, adjusted EPS $1.15 (+5.5% YoY) while GAAP EPS was flat at $0.99 . The company cited volume improvement, expanded gross margins, and expense control as drivers .
  • Results beat S&P Global consensus: adjusted EPS $1.15 vs $1.12*, revenue $21.15B vs $21.08B*, and EBITDA ~$1.12B vs $1.11B*, driven by stronger local business and below-the-line tax benefit; management said the quarter beat by $0.03, with ~$0.02 from tax .
  • Local momentum inflected: USFS local volume was -0.2% reported (ex-FreshPoint exit +0.3%); management expects at least +100 bps sequential improvement in Q2 and noted October trends are stronger than September .
  • FY26 guidance reiterated: sales growth ~3%-5% and adjusted EPS $4.50-$4.60 (1%-3%), including a $100M ($0.16) incentive comp headwind; tax rate ~23.5%-24%, interest expense ~$700M, other expense ~$65M, capex ~$700M, and ~$1B each in dividends and buybacks .
  • Stock reaction catalysts: beat on adjusted EPS/revenue vs consensus*, reiterated FY26 guide, and improving local trajectory with AI 360 and Perks 2.0 early traction .

What Went Well and What Went Wrong

  • What Went Well

    • Adjusted profitability outperformed: adjusted operating income up 2.9% to $898M; adjusted EPS up 5.5% to $1.15, exceeding expectations, with gross margin +13 bps to 18.5% . CEO: “Our Q1 adjusted EPS performance exceeded expectations, fueled by strong improvement in our local business” .
    • International delivered “eighth consecutive” double-digit profit growth: sales +4.5%, gross margin +43 bps to 20.8%, adjusted operating income +13.1% to $147M; local case volume ~+5% . CFO: “Our strategy… underscores the significant operational advantages enabled by our size and scale” .
    • Supply chain productivity and service: CEO called it the strongest quarter in six years for service and cost per piece; improved on-time/in-full and reduced accidents/shrink .

  • What Went Wrong

    • U.S. Foodservice margin/expenses pressured by investments: USFS operating income down 3.1% (GAAP) and -1.0% (adjusted) as operating expenses grew 5.7% (4.7% adjusted) amid capacity and sales headcount additions .
    • Local case growth slightly negative on a reported basis: USFS local -0.2% (ex-FreshPoint exit +0.3%), and Sysco brand penetration declined YoY (US Broadline -93 bps; Local -85 bps) .
    • Free cash flow seasonally negative: CFO highlighted free cash flow of -$50M on timing/seasonality; GAAP operating cash flow $86M, capex $136M .

Financial Results

MetricQ3 FY25Q4 FY25Q1 FY26
Sales ($B)$19.60 $21.14 $21.15
Gross Margin (%)18.27% 18.86% 18.45%
Operating Income (GAAP, $M)$681 $889 $800
Operating Margin (GAAP, %)3.47% 4.21% 3.78%
Adjusted Operating Income ($M)$773 $1,095 $898
Adjusted Operating Margin (%)3.94% 5.18% 4.25%
Diluted EPS (GAAP)$0.82 $1.10 $0.99
Adjusted Diluted EPS$0.96 $1.48 $1.15

Segment performance (Q1 FY26)

  • US Foodservice: Sales $14.78B; Gross Profit $2.82B; Gross Margin 19.10%; Operating Income $880M; Adjusted OI $916M .
  • International: Sales $3.97B; Gross Profit $826M; Gross Margin 20.83%; Operating Income $114M; Adjusted OI $147M .
  • SYGMA: Sales $2.13B; Gross Profit $170M; Gross Margin 7.98%; Operating Income $25M .
  • Other/GSC: Other operating income $4M; Global Support Center operating loss $(223)M .

Key KPIs (Q1 FY26)

  • Case growth: USFS +0.1%; Local -0.2% .
  • Sysco brand mix: US Broadline 35.6%; Local 46.1% .
  • Net leverage: Net Debt/Adj EBITDA 2.90x; Liquidity ~$3.5B; Cash $844M .
  • Cash flow/capex: Operating cash flow $86M; Free cash flow $(50)M; Capex $136M .
  • Dividend: $0.54 per share declared (payable Jan 23, 2026) .

Vs. S&P Global consensus (Q1 FY26 and next quarter)

MetricQ1 FY26 ActualQ1 FY26 ConsensusSurpriseQ2 FY26 Consensus
Revenue ($B)$21.15 $21.08*+$0.07$20.81*
Adjusted EPS$1.15 $1.12*+$0.03$0.98*
EBITDA ($B)~$1.12*~$1.11*+$0.01~$1.02*

Values with asterisks are retrieved from S&P Global consensus and may not have document citations.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Sales GrowthFY26~3%–5% (to ~$84–$85B) ~3%–5% Maintained
Adjusted EPSFY26$4.50–$4.60; includes ~$0.16 headwind $4.50–$4.60; includes ~$0.16 headwind; excl. headwind ~5%–7% growth Maintained
Adjusted EPS growthQ2 FY26—~+4%–+6% YoY; midpoint aligns with ~$0.98 consensus New phasing detail
Tax RateFY26—~23.5%–24% New detail
Interest ExpenseFY26—~ $700M New detail
Other ExpenseFY26—~ $65M New detail
CapexFY26—~ $700M (~<1% of sales) New detail
Shareholder ReturnsFY26~$1B dividends; ~$1B buybacks ~$1B dividends; ~$1B buybacks Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 FY25, Q4 FY25)Current Period (Q1 FY26)Trend
Local case growthQ3: USFS local -3.5% amid macro/weather headwinds ; Q4: local -1.5% with improving exit velocity .USFS local -0.2%; excluding FreshPoint exit, +0.3%; expect at least +100 bps sequential improvement in Q2; October > September .Improving sequentially; positive inflection.
Supply chain productivityQ3: Elevated supply chain costs ; Q4: improved outcomes vs expectations .“Strongest quarter in six years” for service and cost per piece; improved safety and shrink .Material improvement and durable focus.
AI/Technology (AI 360)Not highlighted in prior 8-Ks.AI 360 launched; ~90% SE adoption; correlated with improved selling/productivity; also Perks 2.0 rolled out .New initiative; early positive traction.
Inflation/deflation & tariffsQ3 inflation ~2.1% ; Q4 ~3.5% .Total product cost inflation 3.4%; USFS ~2.6%; Intl ~4.5% (Canada tariffs, GB wage inflation); poultry/dairy/produce deflation; beef inflation moderating .Moderating toward ~2% FY guide; managed effectively.
International performanceQ3 AOI +17.4% ; Q4 adj OI +20.1% .Sales +4.5%; adj OI +13.1%; ~5% local case growth; broad-based by region .Continued double-digit profit growth.
Capital returnsFY25: ~$2.3B returned .FY26 plan ~$1B dividends and ~$1B buybacks; dividend +6% YoY .Consistent shareholder return profile.

Management Commentary

  • CEO Kevin Hourican: “Our Q1 adjusted EPS performance exceeded expectations, fueled by strong improvement in our local business… Momentum is building at Sysco, and the positive outcomes we are seeing re-enforce our confidence in our full year guide.”
  • CFO Kenny Cheung: “Based on a strong Q1 and trends observed in October, we are confident in our full year guidance of sales growth of 3%-5% and adjusted EPS growth of 1%-3%, which includes an approximate $100 million ($0.16) headwind from lapping lower incentive compensation in fiscal 2025.”
  • CEO on supply chain: “In my six years at Sysco, this is the strongest quarter our supply chain has delivered from a service and cost perspective.”
  • CEO on local momentum: “Our Sysco Broadline local business inflected positive in the quarter… We anticipate that we will improve our total U.S. local by at least an additional 100 basis points in Q2 versus Q1.”

Q&A Highlights

  • Local Salesforce productivity and tools: Retention stability is the biggest driver of local momentum; AI 360 adoption (~90%) correlates with improved selling; Perks 2.0 improves retention/penetration among most profitable accounts .
  • Guidance confidence and beat composition: Q1 was a $0.03 EPS beat ($0.01 from revenue/operating income, ~$0.02 from lower tax); reiterated FY26 guide and introduced Q2 EPS growth of 4%–6% with midpoint ~consensus .
  • Volume outlook and reporting: Expect at least +100 bps sequential improvement in USFS local in Q2; minor upgrade to include specialty (Buckhead/Newport) volumes in case reporting (~0–10 bps impact) .
  • Inflation/deflation dynamics: US Broadline ~2.6% inflation; international ~4.5% driven by Canada tariffs and UK wage inflation; poultry/dairy/produce deflation; beef still elevated but moderating .
  • Segment mix: Non-commercial national accounts strong; large national restaurant chains face pressure, which is less profitable mix; local growth favored for P&L .

Estimates Context

  • Q1 FY26 results vs consensus (S&P Global): adjusted EPS $1.15 vs $1.12*, revenue $21.15B vs $21.08B*, EBITDA ~$1.12B vs ~$1.11B*; management highlighted a $0.03 beat with ~$0.02 tax benefit .
  • Forward (Q2 FY26): consensus EPS ~$0.98* and revenue ~$20.81B*; management guided Q2 EPS growth ~4%–6% with midpoint aligned to ~$0.98 .
    Values with asterisks are retrieved from S&P Global.

Key Takeaways for Investors

  • Adjusted EPS and revenue beat S&P consensus*, supported by gross margin expansion and early signs of local volume inflection; October trends continue positive, supporting a constructive near-term setup .
  • FY26 guidance unchanged; explicit Q2 EPS phasing (~in line with ~$0.98 consensus) lowers near-term estimate risk while management-specific initiatives, not macro, drive momentum .
  • International remains a structural growth/profit lever (8th straight quarter of double-digit profit growth), providing diversification as national restaurant chains soften .
  • Local growth drivers (retention, AI 360, Perks 2.0) are in early innings and should lift penetration, drop size, and mix; watch Sysco Brand mix and local case trends for confirmation .
  • Margin management intact even with selective deflation; gross margin expansion alongside disciplined opex should support EPS despite investment in capacity and sales headcount .
  • Balance sheet and capital returns remain supportive (2.9x net leverage; ~$1B dividends and ~$1B buybacks), with a $0.54 dividend declared for Jan 2026 .
  • Near-term watch items: local volume trajectory (ex-FreshPoint), national chain softness, inflation mix (beef vs deflationary categories), and execution on capacity investments and specialty expansion .

Citations:

  • Q1 FY26 press release and financials .
  • Q1 FY26 8-K and exhibits .
  • Q4 FY25 8-K for sequential comparisons .
  • Q3 FY25 8-K for two-quarter trend context .
  • Q1 FY26 earnings call transcript .
  • Dividend release .

S&P Global consensus values are marked with an asterisk (*) and were retrieved from S&P Global.