Sysco’s sector, Consumer Staples, racked up a good first half in 2017, gaining roughly 11% by mid-year, but then stumbled into a downtrend that by early November had cut its YTD gain to around 3%. Meanwhile, SYY limped into 2017 after posting an all-time high of $57.07 in December 2016. But the stock shed 12% into early February (note the huge spike low on the daily chart), rebounded to come within a dollar or so of its record high in May, then sold off again with its sector into early July.
Since then, though, SYY bulls have looked a little hungrier. The stock outperformed its sector by rallying around 16% off its July low and, most recently, posted big up days on October 31 and November 3 that helped take SYY to a record intraday high of 57.23 and high close of $56.66—all in time for today’s earnings release.
Sysco beat estimates on both earnings ($0.74 vs. $0.73) and revenue ($14.65 billion vs. $14.46 billion), but in early trading Monday, at least, it looked like traders had already priced in the good news: The stock tanked more than 4% intraday, right into the middle of the September-October trading range. It looked like a classic case of a market hitting its head on resistance and getting a terrible headache.
It’s worth noting, though, the company has missed quarterly EPS estimates only twice over the past two years,1 and during this period the stock was up a week after earnings five of eight times for an average gain of 1.68%. The stock’s performance immediately after earnings has often been mixed, although rarely as negative as today’s big sell-off.
Decoupling the price action from the earnings event offers yet another perspective. Sysco’s history after similar events over the past 30 years (rallying more than 2% intraday and then dropping at least 4% intraday one day later) points to the potential for a bounce: the stock was typically higher one to three days later, with better than average odds for a higher close. And Sysco’s performance after all days that closed 3-5% lower following an up day (58 examples) was net positive over the next week.
The stock now has more than $3 of range to play with between Friday’s high and yesterday’s low. Even if the resistance ultimately holds, the stock may regain its footing temporarily if it can remain above Monday’s low.
1. Earnings Whispers: www.earningswhispers.com/epshistory/syy. 11/06/17.