Sysco Corp. (NYSE:SYY)

The analysis of the financial ratios over the six-year period reveals several notable trends concerning asset utilization, liquidity, leverage, profitability, and returns.

Total Asset Turnover

Both reported and adjusted total asset turnover ratios exhibit a decline from 2019 through 2021, dropping from above 3.3 to around 2.3-2.4, indicating a reduction in the effectiveness of asset use during this time. However, this trend reverses in 2022, with ratios rising again close to previous levels around 3.1 to 3.4, followed by a slight dip in 2024. Overall, asset turnover shows resilience with fluctuating efficiency but maintains a relatively high turnover rate throughout.

Current Ratio

The reported and adjusted current ratios display an inconsistent pattern. Starting at approximately 1.33-1.34 in 2019, the ratio notably increases to near 1.84-1.89 in 2020, suggesting improved short-term liquidity. However, it subsequently declines steadily to about 1.2 by 2024, pointing to a tightening liquidity position over the latter years.

Debt to Equity

This leverage metric reveals significant volatility. Initially stable at around 3.26 in 2019, it surges dramatically to double-digit levels in 2020, peaking at 12.47 (reported) and 10.62 (adjusted), indicating a sharp increase in financial leverage or reliance on debt financing. Thereafter, it gradually decreases but remains elevated relative to the earliest period, ending near 6.44 (reported) and 7.02 (adjusted) in 2024. This indicates a substantial reduction in leverage from the peak but overall higher indebtedness than in 2019.

Debt to Capital

This ratio remains relatively stable throughout the period, fluctuating narrowly between 0.77 and 0.93. Despite the fluctuations in debt to equity, the proportion of debt in the capital structure shows limited variation, implying that changes in equity levels may contribute materially to the variations observed in debt to equity.

Financial Leverage

The financial leverage ratio aligns with the debt to equity movement, showing a significant spike in 2020, peaking above 19 (reported) and 16 (adjusted). This is followed by a gradual decline but maintaining elevated levels compared to 2019, ending at around 13.4 (reported) and 13.3 (adjusted) in 2024. The data suggests increased use of debt to finance assets during 2020 and a moderate deleveraging trend thereafter.

Net Profit Margin

Margins experience a steep decline in 2020 to about 0.4%, reflecting reduced profitability during this period. Recovery begins in 2021 and continues steadily, with margins reaching approximately 2.3% to 2.6% by 2023 and maintaining this level into 2024. This pattern indicates resilience and improved operational profitability post-2020 downturn.

Return on Equity (ROE)

ROE demonstrates considerable volatility, dropping sharply in 2020 to below 20%, recovering substantially in subsequent years, and peaking at over 100% in 2024 (reported and adjusted). The high values in later years suggest exceptionally strong returns to shareholders, potentially influenced by the high financial leverage evidenced during the period.

Return on Assets (ROA)

ROA declines significantly in 2020, aligning with other profitability measures, then progressively improves from 2021 onward, stabilizing near 7.8% by 2024. Although not as dramatic as ROE, the upward trend post-2020 signals stronger asset profitability, consistent with improved operational performance.

In summary, the fiscal years reflect a period of stress and recovery. The surge in debt-related ratios in 2020 suggests increased borrowing or financing challenges, coinciding with reduced profitability and liquidity. Subsequent years show efforts toward deleveraging and recovery in profitability and efficiency, culminating in strong returns to equity holders despite a tempered asset turnover and current ratio. The company's financial dynamics point to adaptation during a disruptive period with improved operational and financial performance in the later years.

The financial data reveals several key trends over the six-year period under review. Sales experienced a decline from 2019 to 2021, dropping from 60,114 million to 51,298 million US dollars. However, starting in 2022, there was a pronounced recovery and growth trend, with sales increasing significantly to 68,636 million, then continuing to rise to 76,325 million in 2023 and 78,844 million in 2024. This indicates a strong rebound and expansion phase in recent years.

Total assets presented a generally upward trajectory with some fluctuations. From 17,967 million US dollars in 2019, total assets increased to 22,628 million in 2020, then slightly decreased to 21,414 million in 2021, followed by modest growth through 2022 and 2023, reaching 24,917 million by 2024. This suggests ongoing investment and asset accumulation despite a brief dip in 2021.

The reported total asset turnover ratio, which measures the efficiency of asset use to generate sales, declined sharply from 3.35 in 2019 to 2.34 in 2020, then held steady around 2.4 in 2021. Subsequently, it recovered strongly to 3.11 in 2022 and further increased to 3.34 in 2023 before slightly declining to 3.16 in 2024. This pattern aligns with the sales trends, reflecting lower asset utilization efficiency in the initial period followed by improved operational efficiency during the sales recovery phase.

Adjusted total assets show similar movement to reported total assets, although with slightly different levels due to adjustments. The adjusted total assets rose from 18,455 million in 2019 to a peak of 22,769 million in 2020, then fell to 21,179 million in 2021, followed by gradual increases through 2024 to 24,526 million. This adjustment likely accounts for revaluations or asset reclassifications.

The adjusted total asset turnover ratio parallels the reported turnover trends. It dropped from 3.26 in 2019 to 2.32 in 2020, then began to recover steadily, reaching a high of 3.4 in 2023 before a slight decline to 3.21 in 2024. The recovery in turnover after 2020 suggests improving efficiency in the deployment of the adjusted asset base in generating sales revenue.

Overall, the data reflects a period of initial contraction or operational challenges through 2020 and 2021, evidenced by declining sales and asset turnover ratios, followed by a robust recovery characterized by significant sales growth and improved asset utilization efficiency from 2022 onward. Asset levels have steadily increased over the full period, supporting the growth in sales and enhanced turnover ratios in the later years.

The financial data reveals several notable trends regarding liquidity and short-term financial health over the six-year period examined.

Current Assets

Current assets exhibited significant growth from 2019 through 2020, with a considerable increase from $8,142 million to $12,348 million. However, following this peak, current assets declined somewhat in 2021 and 2022, stabilizing around the $10,500 million mark in subsequent years. The level remained relatively consistent between 2022 and 2024, with a marginal upward trajectory towards $11,043 million by 2024.

Current Liabilities

Current liabilities steadily increased every year, rising from $6,103 million in 2019 to $9,241 million in 2024. The rise was relatively consistent year-over-year, indicating increasing short-term obligations. The largest increase in current liabilities occurred between 2021 and 2022.

Reported Current Ratio

The reported current ratio peaked in 2020 at 1.84, reflecting the high growth in current assets relative to liabilities during that period. Post-2020, the current ratio declined progressively, falling to 1.2 by 2024. This trend suggests a tightening of liquidity and a diminishing buffer for covering short-term liabilities with current assets.

Adjusted Current Assets

The adjusted current assets mirrored the pattern of reported current assets, showing an increase from 2019 to 2020, a decline in 2021 and 2022, and stabilization in the later years. The adjusted figures are slightly higher than the reported values but follow the same overall trends.

Adjusted Current Ratio

The adjusted current ratio trend closely follows the reported current ratio, peaking in 2020 at 1.89 then decreasing steadily to 1.2 by 2024. This decline is consistent with the rise in current liabilities, indicating that liquidity has become more constrained when using adjusted asset figures as well.

Overall, the data indicates that while current assets experienced a sharp increase in 2020, this was not sustained in the following years. At the same time, current liabilities have consistently increased, resulting in a declining current ratio and adjusted current ratio since 2020. This trend suggests increasing pressure on the company’s short-term liquidity position, warranting close monitoring and potential strategic adjustments to manage working capital efficiently.

Total Debt

The total debt experienced a significant increase from 8,163 million USD in mid-2019 to a peak of 14,447 million USD in mid-2020. Subsequently, it declined to 10,648 million USD by mid-2022 but has risen again to 11,982 million USD by mid-2024, indicating some volatility in the debt levels over the period.

Shareholders’ Equity

Shareholders’ equity displayed considerable fluctuation, starting at 2,503 million USD in mid-2019, dropping sharply to 1,159 million USD in mid-2020. This was followed by a partial recovery to 2,009 million USD in mid-2023, then a slight decrease to 1,860 million USD by mid-2024. Overall, equity values have been volatile, with notable declines and recoveries.

Reported Debt to Equity Ratio

The reported debt to equity ratio surged from 3.26 in mid-2019 to an especially high 12.47 in mid-2020, reflecting the simultaneous increase in debt and sharp decrease in equity. This ratio then decreased steadily to 5.18 in mid-2023, before increasing slightly to 6.44 in mid-2024, suggesting some normalization but with relatively high leverage maintained.

Adjusted Total Debt

Adjusted total debt generally follows the trend of reported total debt, increasing from 8,704 million USD in mid-2019 to a maximum of 15,078 million USD in mid-2020. Thereafter, it declined gradually to 11,166 million USD in mid-2023 before a rise to 12,945 million USD by mid-2024. The adjustments do not substantially alter the overall debt pattern.

Adjusted Shareholders’ Equity

Adjusted shareholders’ equity began at 2,658 million USD in mid-2019, declined to 1,420 million USD in mid-2020, and then remained relatively stable around the 1,358 to 1,970 million USD range from mid-2021 to mid-2024, ending slightly lower at 1,845 million USD in mid-2024. This reflects similar volatility as the unadjusted equity figures.

Adjusted Debt to Equity Ratio

The adjusted debt to equity ratio shows a sharp increase from 3.28 in mid-2019 to 10.62 in mid-2020, reflecting increased leverage and decreased equity during this period. It peaked further at 8.39 in mid-2022 before declining to 5.67 in mid-2023. By mid-2024, it rose again to 7.02, indicating leverage remains elevated despite some intermediate improvements.

Total Debt

The total debt experienced a significant increase from 8,163 million USD in 2019 to a peak of 14,447 million USD in 2020, indicating a substantial rise in borrowings. Subsequently, it declined over the next three years to 10,411 million USD in 2023 before rising again to 11,982 million USD in 2024. This pattern suggests a possible strategic adjustment in debt levels, with a notable reduction after 2020 followed by a moderate increase in the latest period.

Total Capital

Total capital followed a comparable trend to total debt, increasing sharply from 10,666 million USD in 2019 to 15,605 million USD in 2020. It then decreased progressively until 2022 before rising again modestly through 2023 and 2024, reaching 13,842 million USD. This movement reflects changes in the company’s capital structure, with a peak in 2020 and a recovery phase starting from 2023.

Reported Debt to Capital Ratio

The reported debt to capital ratio showed a high leverage position across the period. It surged from 0.77 in 2019 to 0.93 in 2020, indicating increased reliance on debt financing. After 2020, the ratio declined but remained elevated, fluctuating between 0.84 and 0.89, and ending at 0.87 in 2024. This suggests the company maintained a consistently leveraged capital structure with some reduction in risk after 2020 but still a significant proportion of debt relative to capital.

Adjusted Total Debt

Adjusted total debt mirrored the reported total debt's pattern, rising sharply in 2020 to 15,078 million USD and then declining over the next three years. It increased again in 2024 to 12,945 million USD, slightly higher than the reported figure, indicating inclusion of additional debt-related adjustments. This adjustment reinforces the trend of initial peak debt levels, subsequent reduction, and a moderate rebound.

Adjusted Total Capital

Adjusted total capital also demonstrated a pattern similar to total capital, with a peak in 2020 at 16,498 million USD followed by declines through 2022 and a gradual upward movement in 2023 and 2024, reaching 14,790 million USD. The adjustments indicate a slightly larger capital base than reported figures but maintain the same overall trend.

Adjusted Debt to Capital Ratio

The adjusted debt to capital ratio was consistently high, increasing sharply from 0.77 in 2019 to 0.91 in 2020. Thereafter, it remained relatively stable around 0.89 before declining slightly to 0.85 in 2023 and rising slightly to 0.88 in 2024. This pattern shows sustained leverage with minor fluctuations, reflecting ongoing dependence on debt financing when considering adjusted figures.

Overall Analysis

Over the observed six-year period, the company increased its leverage significantly in 2020, as reflected in both total and adjusted debt and capital figures and corresponding debt to capital ratios. Following this peak, there was a clear trend towards deleveraging, demonstrated by reductions in debt and capital and lower debt to capital ratios through 2023. However, this trend reversed somewhat in 2024, with an uptick in debt levels and leverage ratios. The consistent high leverage ratios indicate a strategic preference or necessity to maintain substantial debt funding relative to capital, accompanied by periodic adjustments.

Total Assets

Total assets increased steadily over the six-year period, growing from US$17,967 million in mid-2019 to US$24,917 million by mid-2024. This growth reflects an overall expansion in the company's asset base, with a notable acceleration in the last year analyzed.

Shareholders’ Equity

Shareholders’ equity displayed volatility, starting at US$2,503 million in 2019, declining sharply to US$1,159 million in 2020, then partially recovering to US$1,860 million by 2024. The equity value decreased significantly in 2020, saw fluctuations in subsequent years, and remained below the initial 2019 value by the end of the period.

Reported Financial Leverage

Reported financial leverage exhibited considerable variation, peaking at 19.53 in 2020, indicating increased reliance on debt relative to equity that year. Subsequently, leverage decreased to 11.36 in 2023 before rising again to 13.4 in 2024, demonstrating fluctuating capital structure risk levels throughout the period.

Adjusted Total Assets

The trend in adjusted total assets was similar to the reported total assets, rising from US$18,455 million in 2019 to US$24,526 million in 2024. Slight differences exist between reported and adjusted figures, but the overall asset growth pattern remains consistent.

Adjusted Shareholders’ Equity

Adjusted shareholders’ equity mirrored the volatility seen in reported equity, starting at US$2,658 million in 2019, dropping to US$1,420 million in 2020, and recovering to US$1,845 million by 2024. This implies adjustments did not significantly alter the equity trend.

Adjusted Financial Leverage

Adjusted financial leverage followed a similar pattern to reported leverage, peaking at 16.04 in 2022 before decreasing and then slightly increasing to 13.29 by 2024. This indicates consistent trends in leverage when considering adjusted figures, reinforcing observations regarding debt-equity dynamics.

Overall Analysis

The company experienced substantial growth in asset size over the period combined with a fluctuating equity base, leading to variable financial leverage levels. The sharp decline in equity in 2020 coincided with the highest leverage ratios, suggesting increased financial risk during that year. Subsequent partial recovery in equity and reductions in leverage indicate efforts to strengthen the balance sheet, though leverage levels remain elevated compared to 2019. Adjusted figures confirm these trends, underscoring persistent volatility in capital structure while assets showed steady growth.

The adjusted net profit margin exhibited fluctuations over the observed period. Initial values were relatively consistent with net earnings, but significant variations occurred, particularly in 2020. Subsequent years demonstrate a recovery and then stabilization, though with some minor decline in the most recent period.

Overall Trend

From 2019 to 2024, the adjusted net profit margin initially decreased, reached a low point in 2020, and then generally increased through 2023 before experiencing a slight decrease in 2024. The margin moved from 2.26% in 2019 to 2.41% in 2024.

2020 Anomaly

A substantial decrease in the adjusted net profit margin is observed in 2020, falling to 0.42%. This corresponds with a significant reduction in both adjusted net earnings and sales. This suggests a disproportionate impact of external factors or internal challenges on profitability during this period.

Recovery and Growth (2021-2023)

Following the low in 2020, the adjusted net profit margin demonstrated a recovery. It increased from 0.42% in 2020 to 1.39% in 2021, 1.33% in 2022, and peaked at 2.57% in 2023. This improvement coincided with increases in both adjusted net earnings and sales, indicating improved operational efficiency and/or favorable market conditions.

Recent Performance (2023-2024)

The adjusted net profit margin experienced a slight decline in 2024, decreasing to 2.41% from 2.57% in 2023. While sales continued to increase, adjusted net earnings experienced a modest decrease, contributing to the margin contraction. This suggests potential cost pressures or a shift in sales mix impacting profitability.

Comparison to Reported Margin

The adjusted net profit margin consistently differs from the reported net profit margin across all periods. The adjustments made to net earnings appear to have a notable impact on the final profitability figure, with the adjusted margin generally lower than the reported margin, except in 2020 where the difference was minimal.

In summary, the adjusted net profit margin demonstrates a volatile pattern, heavily influenced by fluctuations in sales and adjusted net earnings. While a general upward trend is evident from 2020 through 2023, the most recent period indicates a potential stabilization or slight decline, warranting further investigation.

The adjusted return on equity (ROE) exhibited fluctuating performance over the analyzed period. Initial values decreased before stabilizing and then increasing significantly in later years. A review of the underlying components, adjusted net earnings and adjusted shareholders’ equity, provides further insight into these movements.

Adjusted ROE Trend

The adjusted ROE began at 51.15% in 2019, declining to 15.47% in 2020. A partial recovery was observed in 2021, reaching 47.43%, followed by an increase to 67.34% in 2022. The adjusted ROE continued its upward trajectory, reaching 99.39% in 2023 and further increasing to 103.14% in 2024. This represents a substantial overall increase from the low point in 2020.

Adjusted Net Earnings

Adjusted net earnings decreased from US$1,359 million in 2019 to US$220 million in 2020, mirroring the decline in adjusted ROE. A significant increase to US$711 million occurred in 2021, followed by a further rise to US$914 million in 2022. The most substantial growth was observed in 2023, with adjusted net earnings reaching US$1,958 million, and continued into 2024 with US$1,903 million. The consistent growth in adjusted net earnings from 2020 onwards appears to be a primary driver of the increasing adjusted ROE.

Adjusted Shareholders’ Equity

Adjusted shareholders’ equity increased from US$2,658 million in 2019 to US$1,420 million in 2020. It remained relatively stable at US$1,500 million in 2021 and US$1,358 million in 2022. A notable increase was then observed in 2023, reaching US$1,970 million, and continued to US$1,845 million in 2024. While shareholders’ equity generally trended upward, its impact on the adjusted ROE was moderated by the more substantial growth in adjusted net earnings.

The interplay between adjusted net earnings and adjusted shareholders’ equity suggests that improvements in profitability have been the dominant factor influencing the adjusted ROE. The substantial increase in adjusted ROE from 2020 to 2024 is largely attributable to the significant growth in adjusted net earnings, despite fluctuations in adjusted shareholders’ equity.

Comparison to Reported ROE

Reported ROE values were consistently higher than adjusted ROE values across all periods. The difference between the two metrics suggests that adjustments to net earnings and shareholders’ equity have a material impact on the calculated return. Reported ROE peaked at 105.11% in 2024, while adjusted ROE reached 103.14% in the same period.

The adjusted return on assets (ROA) exhibited fluctuations over the analyzed period. Initial values were followed by a period of recovery and subsequent stabilization. A review of the adjusted net earnings and adjusted total assets reveals insights into these movements.

Adjusted ROA Trend

The adjusted ROA began at 7.37% in 2019, remaining relatively stable at 0.96% in 2020. A subsequent increase was observed in 2021, reaching 3.36%, followed by further growth to 4.20% in 2022. The adjusted ROA experienced a significant rise to 8.72% in 2023 before decreasing slightly to 7.76% in 2024.

Adjusted Net Earnings Impact

Adjusted net earnings demonstrated a decrease from US$1,359 million in 2019 to US$220 million in 2020. These earnings then increased to US$711 million in 2021, US$914 million in 2022, and reached US$1,958 million in 2023. A slight decrease to US$1,903 million was recorded in 2024. The substantial increase in adjusted net earnings from 2020 through 2023 likely contributed to the corresponding rise in adjusted ROA during that period.

Adjusted Total Assets Impact

Adjusted total assets increased from US$18,455 million in 2019 to US$22,769 million in 2020. They then decreased to US$21,179 million in 2021, and rose to US$21,779 million in 2022. Further increases were observed in 2023 (US$22,446 million) and 2024 (US$24,526 million). The growth in adjusted total assets, particularly in 2020 and 2024, may have partially offset the positive impact of increasing adjusted net earnings on the adjusted ROA.

The decrease in adjusted ROA from 2023 to 2024, despite a continued increase in adjusted net earnings, suggests that the growth in adjusted total assets outpaced the growth in earnings during that period. The initial low point in 2020 for adjusted ROA was primarily driven by a significant reduction in adjusted net earnings.