Back in August, activist investor Nelson Peltz took a stake of about 7% in Sysco. A 13D filing from Trian confirmed that Peltz believes shares are undervalued and represent an attractive investment opportunity. Peltz has met with and engaged in discussions with the CEO and chairman of Sysco.
Undoubtedly Peltz was eager to hear what Sysco had to say regarding its new operating income and plan to return capital to shareholders. The company expects to achieve its new operating income and return on invested capital targets in a few different ways:
- Accelerating local case growth.
- Improving gross margins.
- Leveraging its end-to-end supply chain.
- Reducing administrative costs.
- Generating over $1 billion in free cash flow per year.
Bill DeLaney, Sysco President and CEO, said:
Sysco has a substantial market opportunity, a sound strategy, great people and a recent record of improving financial results. Over the past few months, our executive team has developed a robust three-year plan that targets at least $400 million in annualized operating income growth and a 15 percent return on invested capital by Fiscal 2018. This plan leverages a variety of new capabilities and initiatives developed over the past several years that together provide a strong foundation for ongoing value creation. We are confident that this plan is the right one for Sysco shareholders, customers and associates, and we look forward to delivering on these commitments.
He continued:
Our primary focus remains on delivering a differentiated set of products and services to help our customers grow their businesses and, in turn, profitably grow our own business. By delivering this plan, we will advance our vision of becoming our customers’ most valued and trusted business partner.
Shares of Sysco were down 0.8% at $39.55 on Tuesday afternoon. The stock has a consensus analyst price target of $39.22 and a 52-week trading range of $35.45 to $41.87.
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