Reviewing Sysco Corporation (SYY) and Kroger Company (The) (NYSE:KR)

Kroger Company (The) (NYSE: KR) and Sysco Corporation (NYSE:SYY) are both large-cap retail/wholesale companies, but which is the superior business? We will compare the two businesses based on the strength of their institutional ownership, earnings, risk, profitability, analyst recommendations, dividends and valuation.

Insider and Institutional Ownership

77.4% of Kroger Company (The) shares are owned by institutional investors. Comparatively, 78.4% of Sysco Corporation shares are owned by institutional investors. 0.9% of Kroger Company (The) shares are owned by company insiders. Comparatively, 8.8% of Sysco Corporation shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company will outperform the market over the long term.

Analyst Recommendations

This is a breakdown of recent ratings and target prices for Kroger Company (The) and Sysco Corporation, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Kroger Company (The) 1 15 9 0 2.32
Sysco Corporation 0 7 7 0 2.50

Kroger Company (The) currently has a consensus price target of $30.38, suggesting a potential upside of 29.34%. Sysco Corporation has a consensus price target of $56.42, suggesting a potential upside of 9.38%. Given Kroger Company (The)’s higher possible upside, research analysts plainly believe Kroger Company (The) is more favorable than Sysco Corporation.

Valuation and Earnings

This table compares Kroger Company (The) and Sysco Corporation’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Kroger Company (The) $117.02 billion 0.18 $5.51 billion $1.66 14.15
Sysco Corporation $54.60 billion 0.51 $3.00 billion $1.90 27.15

Kroger Company (The) has higher revenue and earnings than Sysco Corporation. Kroger Company (The) is trading at a lower price-to-earnings ratio than Sysco Corporation, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Kroger Company (The) and Sysco Corporation’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Kroger Company (The) 1.35% 29.10% 5.29%
Sysco Corporation 1.93% 47.28% 7.60%

Risk and Volatility

Kroger Company (The) has a beta of 0.76, suggesting that its share price is 24% less volatile than the S&P 500. Comparatively, Sysco Corporation has a beta of 0.52, suggesting that its share price is 48% less volatile than the S&P 500.

Dividends

Kroger Company (The) pays an annual dividend of $0.48 per share and has a dividend yield of 2.0%. Sysco Corporation pays an annual dividend of $1.32 per share and has a dividend yield of 2.6%. Kroger Company (The) pays out 28.9% of its earnings in the form of a dividend. Sysco Corporation pays out 69.5% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Kroger Company (The) has increased its dividend for 8 consecutive years and Sysco Corporation has increased its dividend for 46 consecutive years. Sysco Corporation is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

Sysco Corporation beats Kroger Company (The) on 11 of the 17 factors compared between the two stocks.

Kroger Company (The) Company Profile

The Kroger Co. (Kroger) manufactures and processes food for sale in its supermarkets. The Company operates supermarkets, multi-department stores, jewelry stores and convenience stores throughout the United States. As of January 28, 2017, it had operated approximately 4,000 owned or leased supermarkets, convenience stores, fine jewelry stores, distribution warehouses and food production plants through divisions, subsidiaries or affiliates. These facilities are located throughout the United States. As of January 28, 2017, Kroger operated, either directly or through its subsidiaries, 2,796 supermarkets under a range of local banner names, of which 2,255 had pharmacies and 1,445 had fuel centers. As of January 28, 2017, the Company offered ClickList and Harris Teeter ExpressLane, personalized, order online, pick up at the store services at 637 of its supermarkets. P$$T, Check This Out and Heritage Farm are the three brands. Its other brands include Simple Truth and Simple Truth Organic.

Sysco Corporation Company Profile

Sysco Corporation (Sysco) is a distributor of food and related products primarily to the foodservice or food-away-from-home industry. The Company’s segments include Broadline, SYGMA and Other. The Broadline segment includes its Broadline operations located in the Bahamas, Canada, Costa Rica, Ireland, Mexico and the United States. Broadline operating companies distribute a full line of food products and a range of non-food products to both traditional and chain restaurant customers, hospitals, schools, hotels, industrial caterers and other venues where foodservice products are served. SYGMA operating companies distribute a full line of food products and a range of non-food products to certain chain restaurant customer locations. The Other segment includes the Company’s specialty produce; custom-cut meat operations; lodging industry segments; a company that distributes specialty imported products; a company that distributes to international customers, and Sysco Ventures platform.

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