Sysco Corp. (SYY) shares initially rallied over 3.0% on Monday trade to $53.97 after reporting a strong fourth quarter. Shares rose as high as 5.9% ahead of reporting on news that Trian raised their stake in the company. Profit came in at $0.64 a share, four cents higher than the analysts’ estimates of $0.60. Revenue rose 10% to $13.6 billion compared to a year ago, but was a slight miss from the eyed $13.7 billion estimate. CEO DeLaney stated, “I am very pleased with our performance during fiscal 2016, as we made significant progress toward our three-year plan financial objectives. During the year, we had strong local case growth, improved our gross profit, managed expenses well and drove increased operating income.”
The key driver for the rally was the reduction of expenses by 6.8% compared to the same period last year. The company only provided 2017 capital expenditure guidance of 1% of sales. Shares eventually settled flat on the session at $52.18
Price action on the daily chart shows that bullish move is tentatively respecting key trendline resistance that started with the $41.87 high made last August. Since Feb 1st, price has steadily rallied and managed to continue to respect the 50-day SMA. If we see further upside, price may find initial resistance from the $55 zone. Price could form a bearish ABCD pattern. Point D is targeted with the 261.8% Fibonacci expansion level of the B to C leg. If the pattern is invalidated and we continue to see bullishness, further upside may target the psychological $60 level. If bullish momentum stalls, major support will come from the 50-day SMA which currently trades around the $50.84 level.
The Trade: Buy SYY at $50.84, with a stop loss at $50.34 and a take profit at $52.84. The Risk/Reward Ratio is 1:4