Sysco's (SYY) shares fell on news of its proposed $29.1 billion acquisition of Jetro Restaurant Depot, but UBS Securities said in a Thursday note that it is the right long-term strategy as it brings a disruptive industry player into the fold.

Restaurant Depot's cash and carry business serves a subset of small local restaurants that differs from Sysco's existing local business and it offers a stronger margin profile and solid free cash flow conversion, the brokerage said. The company can also provide prices roughly 15% to 20% lower than traditional broadline distribution.

Sysco intends to operate Restaurant Depot as a separate business unit. UBS said it can likely achieve more than $2 billion in additional annual long-term FCF, supporting debt repayments, returns to shareholders and funding for mergers and acquisitions. The deal is expected to close in Q3 of fiscal 2027.

UBS forecasts earnings per share accretion rising from about 9% in fiscal 2028 to 13% in fiscal 2029. Sysco expects EPS accretion of mid-to-high single digits and low-to-mid teens in fiscal 2028 and 2029, respectively.

Sysco expects fiscal Q3 adjusted EPS of $0.94, while UBS expects Q3 and fiscal 2026 EPS of $0.94 and $4.60, respectively. The firm said it no longer models share repurchases in fiscal Q4.

UBS has a buy rating on Sysco and lowered the price target to $90 from $95.

Price: 71.45, Change: -0.18, Percent Change: -0.25