Sysco Corp. (NYSE:SYY)

Net Operating Profit After Taxes (NOPAT)

The NOPAT demonstrates a fluctuating trend over the years. It started at $1,850 million in 2019, experiencing a significant decrease to $665 million in 2020. Gradual recovery is evident in the following years, rising to $861 million in 2021 and increasing substantially to $1,757 million in 2022. The upward trend continued, reaching $2,164 million in 2023 and further increasing to $2,500 million in 2024, marking a strong overall rebound and growth beyond the initial 2019 level.

Cost of Capital

The cost of capital showed relative stability with a slight downward trend after 2019. It declined from 13.03% in 2019 to a low of 10.97% in 2020, then increased again to 12.95% in 2022. Following this peak, it slightly decreased to 12.73% in 2023 and further to 12.57% in 2024. Overall, the cost of capital has fluctuated within a narrow range, indicating relatively consistent capital costs with slight variation year-to-year.

Invested Capital

Invested capital exhibited volatility across the analyzed periods. Starting at $12,842 million in 2019, it rose sharply to $18,092 million in 2020, then declined to $14,339 million in 2021. It remained relatively stable around $14 billion through 2022 and 2023, before increasing again to $16,003 million in 2024. This pattern indicates fluctuations in capital investment, possibly due to strategic shifts or adjustments in asset levels.

Economic Profit

Economic profit underwent significant changes. Positive economic profit of $176 million in 2019 sharply turned negative in 2020 and 2021, with losses of $1,320 million and $916 million respectively. This negative trend diminished considerably by 2022, with economic profit near breakeven at -$70 million. Positive economic profit returned in 2023 at $348 million and improved further to $488 million in 2024. The recovery suggests improved profitability after covering the cost of capital, reflecting enhanced value creation in recent years.

Overall Analysis

The financial data reflects a turbulent period around 2020, likely indicating operational challenges or external shocks. The decline in NOPAT and the sharp increase in invested capital in 2020 could have strained profitability, resulting in negative economic profit in that year and the next. However, subsequent years demonstrate recovery and improved operational efficiency, with increasing NOPAT and positive economic profits from 2023 onward. The relatively stable cost of capital throughout suggests consistent market conditions for funding, while fluctuations in invested capital might be linked to strategic investment decisions. The strengthening economic profit in the latest years indicates enhanced value generation and potentially more effective management of capital resources.

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 experienced significant fluctuations over the examined periods. It started with a positive value of 176 million USD in 2019, followed by a sharp decline to a negative 1320 million USD in 2020. Subsequently, the economic profit improved but remained negative at -916 million USD in 2021 and -70 million USD in 2022. From 2023 onwards, the economic profit turned positive again, with values of 348 and 488 million USD in 2023 and 2024 respectively, indicating a recovery trend.

Invested Capital

The invested capital showed an overall upward trend. It increased from 12,842 million USD in 2019 to a peak of 18,092 million USD in 2020. After that, it decreased to 14,339 million USD in 2021 and remained relatively stable around 14,000 million USD in 2022 and 2023. In 2024, the invested capital rose again to 16,003 million USD, suggesting renewed investment activity or asset growth.

Economic Spread Ratio

The economic spread ratio mirrored the economic profit trend. It was positive at 1.37% in 2019, sharply declined to a negative 7.3% in 2020, and improved slightly to -6.39% in 2021. It almost reached neutrality at -0.49% in 2022. From 2023, the ratio turned positive again, achieving 2.44% and rising further to 3.05% in 2024, reflecting enhanced profitability relative to the invested capital.

Sales

Sales demonstrate a fluctuating yet overall upward trend across the examined periods. Starting at 60,114 million US dollars in mid-2019, sales declined over the next two years, reaching a low of 51,298 million in mid-2021. This was followed by a substantial recovery and growth phase, with sales rising sharply to 68,636 million in mid-2022, and continuing to increase in subsequent years to 76,325 million in mid-2023 and 78,844 million in mid-2024.

Economic Profit

The economic profit exhibits significant volatility during the period. It began with a positive value of 176 million US dollars in mid-2019 but plunged sharply into negative territory, to -1,320 million in mid-2020 and -916 million in mid-2021. Thereafter, a marked recovery is observed, with economic profit approaching breakeven at -70 million in mid-2022 and turning positive again in subsequent years, reaching 348 million in mid-2023 and further increasing to 488 million in mid-2024.

Economic Profit Margin

The economic profit margin follows a pattern similar to economic profit, reflecting profitability relative to sales. The margin was marginally positive at 0.29% in mid-2019 but deteriorated to -2.5% and -1.79% in mid-2020 and mid-2021 respectively, indicating profitability challenges. It improved to near zero (-0.1%) in mid-2022 and then returned to positive values of 0.46% in mid-2023 and 0.62% in mid-2024, denoting a gradual restoration of economic profitability relative to sales.

Overall Insights

The data reveal a period of financial stress coinciding with declining sales and negative economic profit margins in 2020 and 2021. However, the subsequent years show recovery and growth, with both sales and profitability indicators improving steadily. This pattern suggests effective strategic or operational adjustments leading to enhanced financial performance from mid-2022 onwards.