United Natural Foods Tops Q1 Expectations; Shares Up 13.2%

Shares of natural and organic food company United Natural Foods, Inc. (UNFI) jumped 13.2%, after the company reported robust third-quarter results and reaffirmed its full-year guidance.

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Despite ongoing supply chain and labor challenges, UNFI managed to beat both earnings and sales estimates. With the pandemic still persistent, customers prefer at-home food solutions and UNFI is well-positioned to execute the growing demand.

Robust Results

The company reported adjusted earnings of $0.97 per share, a whopping 90.2% year-over-year growth, significantly outpacing analysts’ estimates of $0.50 per share.

Moreover, net sales came in at $7 billion, up 4.7% year-over-year, marginally outpacing Street estimates of $6.8 billion. The sales growth was aided by favorable pricing trends, and growing demand from new and existing customers. However, these were partially offset by supply chain headwinds.

Management Comments

CEO of UNFI, Sandy Douglas, said, “I’m pleased with our start to fiscal 2022 and how UNFI is navigating a challenging operating environment while simultaneously investing for the future, including improved distribution capabilities and new facilities, to better serve our customers.”

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Reaffirms Outlook

Based on current business momentum, UNFI reaffirmed its full-year fiscal 2022 outlook.

The company forecasts FY22 net sales to be between $27.8 billion to $28.3 billion, against the consensus estimate of $28.02 billion.

Additionally, adjusted earnings are projected to fall in the range of $3.90 per share to $4.20 per share, while the consensus estimate is pegged at $4.09 per share.

Analysts’ View

Responding to the company’s quarterly performance, MKM Partners analyst William Kirk maintained a Buy rating on the stock with a price target of $62, which implies 11.5% upside potential to current levels.

Buy rating stocks come with a host of positive catalysts. Kirk lists these factors to base his optimistic view of the stock, including inflation boosting growth, fee income from promotional activities resuming soon, and the deal with Key Foods, which will accelerate growth.

Further, the analyst notes certain United Natural Foods stock risks, including the company’s independent customers losing share to larger conventional grocery stores, and non-renewal of its contract with Amazon.com Inc. (AMZN).

Overall, the stock has a Hold consensus rating based on 2 Buys, 4 Holds, and 1 Sell. The average United Natural Foods price target of $49.17 implies 11.58% downside potential to current levels. However, shares have exploded 245.2% over the past year.