Sysco Corp. (NYSE:SYY)

Net operating profit after taxes (NOPAT)

The net operating profit after taxes exhibits a fluctuating trend over the years. It decreased sharply from 1850 million USD in 2019 to 665 million USD in 2020, indicating a significant profit decline possibly due to adverse conditions. This was followed by a gradual recovery with increases to 861 million USD in 2021, and more substantial growth reaching 1757 million USD in 2022. The upward trend continued with NOPAT rising to 2164 million USD in 2023 and further to 2500 million USD in 2024, demonstrating a robust recovery and strengthening operational profitability over the latter years.

Cost of capital

The cost of capital shows relative stability with minor fluctuations across the period. It started at 13.21% in 2019 and declined to 11.11% in 2020, indicative of potentially reduced financing or opportunity costs during that year. It then generally increased again, reaching 12.56% in 2021 and stabilizing around 13% in subsequent years, finishing at 12.74% in 2024. The modest variations suggest steady capital cost conditions following the initial decline.

Invested capital

Invested capital demonstrates variable movement across the years. It rose markedly from 12,842 million USD in 2019 to a peak of 18,092 million USD in 2020, signaling significant capital deployment despite decreased profitability. However, it declined to 14,339 million USD in 2021 and remained relatively stable through 2022 and 2023, with values around 14,000 million USD. In 2024, invested capital increased again to 16,003 million USD, suggesting renewed investment activity or asset accumulation.

Economic profit

Economic profit reveals a contrasting pattern to NOPAT, reflecting the impact of invested capital and cost of capital. It started positively at 154 million USD in 2019 but turned negative sharply to -1,345 million USD in 2020, indicating that the company's returns failed to cover its cost of capital substantially that year. Economic profit remained negative in 2021 at -939 million USD and improved notably to -94 million USD in 2022, approaching break-even. In 2023, economic profit turned positive again at 324 million USD and increased further to 462 million USD in 2024, signaling effective value creation and improved capital efficiency in recent years.

The financial data reveals significant fluctuations in the profitability metrics over the examined periods. Net earnings decreased sharply from 1674 million USD in June 2019 to 215 million USD in June 2020, reflecting a substantial decline likely influenced by external challenges. This was followed by a partial recovery to 524 million USD in July 2021 and a more pronounced increase to 1359 million USD in July 2022. The upward trend continued with net earnings reaching 1770 million USD in July 2023 and further rising to 1955 million USD by June 2024, indicating a steady restoration and growth in earnings performance.

Similarly, Net Operating Profit After Taxes (NOPAT) demonstrated a comparable trajectory. It declined from 1850 million USD in June 2019 to 665 million USD in June 2020, evidencing a significant contraction in operating profitability. Subsequently, NOPAT showed a moderate increase to 861 million USD in July 2021, followed by a substantial recovery and growth to 1757 million USD in July 2022. This positive momentum persisted with NOPAT rising to 2164 million USD in July 2023 and reaching 2500 million USD by June 2024.

Overall, the data indicates that while profitability metrics experienced a notable downturn around mid-2020, the company has since achieved a strong and consistent rebound in operating and net earnings. The improvement in NOPAT outpaces the growth in net earnings, suggesting enhanced operational efficiency or favorable tax impacts in the more recent periods. The upward trajectory in both measures over the last few reported years points to robust financial recovery and strengthening profitability.

The analysis of the annual financial data reveals significant fluctuations and trends in both the income tax provision and cash operating taxes over the six-year period.

Income Tax Provision

The income tax provision exhibits a notable decline from 332 million USD in 2019 to 78 million USD in 2020, followed by a further decrease to 61 million USD in 2021. However, there is a marked reversal in this trend starting in 2022, with the provision rising sharply to 388 million USD, and continuing to increase in subsequent years, reaching 515 million USD in 2023 and 610 million USD in 2024. This pattern suggests an initial reduction in tax obligations or tax-related benefits during the 2020 and 2021 periods, potentially related to external economic factors or tax law changes, followed by a substantial increase in tax liability or accrual in more recent years.

Cash Operating Taxes

Cash operating taxes show a different trajectory. Beginning at 538 million USD in 2019, these amounts decline to 358 million USD in 2020, indicating a reduction in actual tax payments. However, starting in 2021, cash operating taxes increase to 408 million USD, continuing an upward trend to 588 million USD in 2022, 648 million USD in 2023, and reaching 720 million USD in 2024. This consistent rise from 2021 onwards points to increasing cash tax outflows, which may be linked to higher taxable income, changes in tax regulations, or improved cash management strategies aimed at timely tax payments.

Overall, the data suggest a period of reduced income tax provision and cash tax payments during the early years, particularly around 2020 and 2021, possibly reflecting the impact of economic disruptions or tax relief measures during this time. From 2022 onward, both the income tax provision and cash operating taxes have increased significantly, which may indicate recovery and higher profitability, as well as evolving tax obligations. The divergence and subsequent convergence of these two metrics highlight important dynamics in tax accounting and cash flow management over the analyzed period.

The financial data indicates notable fluctuations and trends in the company's capital structure and financial position over the six-year period.

Total Reported Debt & Leases

The company experienced a significant increase in total reported debt and leases from US$8,704 million in 2019 to a peak of US$15,078 million in 2020. This was followed by a declining trend over the next three years, dropping to US$11,166 million by 2023. However, in 2024, debt levels rose again to US$12,945 million. The initial sharp rise may reflect increased borrowing or lease commitments possibly linked to strategic investments or market conditions, while the subsequent decline suggests deleveraging efforts or repayment activities. The rise in 2024 indicates renewed leverage or financing needs.

Shareholders’ Equity

Shareholders' equity displayed considerable volatility during the period. It drastically decreased from US$2,503 million in 2019 to a low of US$1,159 million in 2020. This was followed by a recovery phase with equity rising to US$2,009 million in 2023, before slightly declining to US$1,860 million in 2024. The sharp drop in 2020 could be indicative of losses incurred, dividend distributions exceeding earnings, or other equity-reducing events. The subsequent recovery implies profitability improvements or capital injections, but the decrease in 2024 suggests some reduction in equity possibly due to changes in retained earnings or other comprehensive income.

Invested Capital

Invested capital saw a marked increase from US$12,842 million in 2019 to a high of US$18,092 million in 2020. After this peak, it decreased to around US$14,100-14,300 million in the following three years before increasing again to US$16,003 million in 2024. This pattern mirrors the debt trends, suggesting that invested capital is largely influenced by changes in financing levels, particularly debt components. The peak in 2020 likely reflects significant capital deployment or acquisition activity, while the partial decline afterward suggests consolidation or divestiture activities. The increase in 2024 points to renewed investment or asset growth.

Overall, the data suggest a period of heightened leverage and capital investment around 2020, followed by a phase of stabilization and partial deleveraging. Equity experienced notable volatility, reflecting changes in company profitability and capital management practices. The recent uptick in debt and invested capital in 2024 may indicate strategic initiatives or market responses requiring increased financing.

Economic Profit

The economic profit exhibited significant fluctuations over the analyzed periods. Starting with a positive value of 154 million in mid-2019, it sharply declined to a substantial negative value of -1,345 million in 2020. This negative trend continued into 2021 and 2022, though the magnitude of losses reduced progressively to -939 million and -94 million, respectively. A notable recovery occurred in 2023 with a return to positive economic profit at 324 million, followed by further improvement to 462 million in mid-2024.

Invested Capital

The invested capital showed an increasing trend overall, starting from 12,842 million in mid-2019 and peaking at 18,092 million in 2020. This was followed by a decline to 14,339 million in 2021 and a relatively stable period through 2022 and 2023, with values around 14,100 to 14,300 million. By mid-2024, invested capital rose again to 16,003 million, indicating renewed investments or assets growth in the most recent period.

Economic Spread Ratio

The economic spread ratio mirrored the fluctuations in economic profit. Initially positive at 1.2% in 2019, it plunged to a deeply negative range in 2020 and 2021 at -7.44% and -6.55%, respectively. The ratio improved significantly in 2022 to -0.67%, nearing break-even, and shifted to positive territory in 2023 at 2.27%. The upward trend continued in mid-2024, reaching 2.89%, indicating improved returns relative to invested capital over time.

Sales Trend

Sales exhibited a fluctuating pattern over the given periods. Beginning at approximately $60.1 billion, sales declined for two consecutive years, reaching a low near $51.3 billion by mid-2021. However, a significant rebound followed, with sales increasing sharply in subsequent years to surpass prior levels, reaching around $78.8 billion by mid-2024. This indicates recovery and growth momentum in recent years.

Economic Profit Trend

The economic profit demonstrated considerable volatility throughout the period. It started positively in 2019 but transitioned into negative territory for three consecutive years, with the most significant losses observed in 2020 and 2021. Recently, there has been a recovery with economic profit returning to positive values in the last two years, climbing steadily to $462 million in mid-2024. This suggests improved profitability and operational efficiency.

Economic Profit Margin Analysis

The economic profit margin mirrored the economic profit's behavior, starting positive at 0.26% in 2019, then declining sharply into negative figures through 2020 to 2022. The margin reached its lowest point around -2.54% in 2020 but showed consistent improvement thereafter, turning positive again in 2023 and rising further to 0.59% by mid-2024. This reflects a gradual improvement in the ability to generate economic profit relative to sales.

Overall Insights

The data suggests a period of operational challenges and decreased profitability from 2020 through 2022, likely impacted by external factors affecting performance. The subsequent recovery in sales coupled with the return to positive economic profit and margin values indicate effective strategic adjustments or favorable market conditions in recent years. The upward trends in both absolute and margin measures of economic profit in the latest periods point toward enhanced value creation.