BMO Responds To Sysco's Q3 Results, Says 'Plan Is Working'

BMO raised the EPS estimates and price target on the shares of SYSCO Corporation (NYSE: SYY) after the food distributor reported better-than-expected third-quarter earnings on favorable weather and the Easter holiday.

Sysco reported adjusted EPS of $0.46, versus BMO's forecast of $0.41 and consensus of $0.42. Analyst Kelly Bania said the company's three-year financial "is working," and the backdrop is favorable.

Late February, the company increased its operating income growth target to "at least $500 million" from the original target of $400 million.

Bania, who has a Market Perform rating on the stock, initially viewed these targets as aggressive. But, the analyst raised estimates on "accelerating local case growth (+3.4 percent, the strongest level in years)," lower admin costs and new market structure.

Related Link: Sysco Provides Update On 3-Year Plan, Boosts Operating Income Growth Target

The analyst's FY2017 and FY2018 EPS estimate moves to $2.29 and $2.53 from $2.14 and $2.26, respectively, as Sysco is set to benefit from the consumer shift toward higher-quality foods.

Bania, who also increased target price to $52 from $44, said Sysco is benefiting from strong trends in ethnic and fresh produce in certain markets in the independent restaurant segment.

Other Voices From The Street

In a related development, CNBC's Jim Cramer stated the food delivery company reported a "really terrific" quarter, but the company's attractiveness extends beyond just one quarterly report.

Nelson Peltz's Trian Partners acquired a stake of more than 7 percent in Sysco back in August 2015. In addition, Peltz was also named to the company's board of directors. According to Cramer, Peltz has a proven track record of picking winners – including Sysco.

Shares of Sysco have gained 17 percent since the start of 2016 and 33 percent over the past year. The stock is currently up 0.16 percent at $48.60.