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Tickers in this Article: SYY
SYSCO (NYSE:SYY) announced its results for the first quarter on November 5, 2012. Sysco, through its subsidiaries and divisions, is a distributor of food and related products.

Earnings play an important role in measuring the appropriate valuation for a stock. Investors should be cautious if the company's stock price is high but it consistently has low earnings. SEE: How To Decode A Company's Earnings Reports

The Numbers: SYSCO beat expectations with its latest EPS and revenue figures. The company reported adjusted net income of 58 cents per share versus the 50 cents per share estimate and revenues of $11.09 billion versus the $10.49 billion estimate. Revenue climbed 4.7% from the same period last year. SYSCO's revenue has grown during each of the past four quarters on a year-over-year basis. The company's net income for the quarter was $286.6 million. According to the reported number, this is down 5.3% from last year's figures. This marks the second quarter in a row that the company's net income has fallen after profits tumbled 8% in the fourth quarter of the last fiscal year.

Management Quote: "Solid sales growth and effective overall operating expense management contributed to increased adjusted EPS in our underlying business for the quarter. Volume gains drove our top line growth as food cost inflation moderated from the historically high levels experienced in recent quarters," said Bill DeLaney, Sysco's president and chief executive officer. "Regarding our multiyear business transformation initiative, we recently achieved a significant milestone by successfully and simultaneously deploying for the first time our new technology platform in two operating companies."

A Look Back: Last quarter was the fifth in a row that the company saw shrinking gross margins, as they fell 0.3 percentage point from the year-earlier quarter to 18.1%. In that span, margins have contracted an average of 0.5 percentage point per quarter on a year-over-year basis.

Looking Ahead: When earnings estimates stay consistent leading up to earnings season, this usually shows analysts accurately predicted earnings estimates and business is stable. Be cautious though as this may also be a warnings sign that earnings could come at a huge surprise to the upside or downside as analyst did not correctly predict earnings. Steady earnings estimates mean there is not enough change going on with the company to make analysts change their opinions. When earning estimates are steady, investors can look at the revenue trend for a more fundamental indicator. At $2.01 per share, the average estimate for the fiscal year has fallen from $2.02 90 days ago.

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