SYSCO CORP. $23 - New York symbol SYY

SYSCO CORP. $23 (New York symbol SYY; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 589.9 million; Market cap: $13.6 billion; Price-to-sales ratio: 0.4; WSSF Rating: Average) sells food and kitchen supplies to over 400,000 restaurants, schools, hotels and hospitals in the U.S. and Canada. The company has about 16% of the North American food-service market. In its third fiscal quarter, which ended March 28, 2009, Sysco’s sales fell 4.5%, to $8.7 billion from $9.1 billion a year earlier. The drop came despite a 3.3% increase in food costs, which Sysco passed on to its customers. Earnings fell 6.1%, to $226.2 million from $240.9 million. Earnings per share fell 5%, to $0.38 from $0.40, on fewer shares outstanding. Some of Sysco’s customers are falling behind on their bills because of the recession. In the first nine months of fiscal 2009, Sysco wrote off $61.6 million of loans to its customers, up from $25.9 million a year earlier. In response to falling demand and the loan writeoffs, Sysco has cut its workforce by 6% in the past year. Sysco probably earned $1.73 a share in fiscal 2009, and the shares trade at 13.3 times that estimate. The $0.96 dividend seems safe, and yields 4.2%. Sysco is a hold.