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Nicholas Kitonyi
Nicholas Kitonyi
Articles (368)  | Author's Website |

United Natural Foods Plummets Despite Earnings Beat

The stock is down more than 13%

September 29, 2020 | About:

Shares of United Natural Foods Inc. (NYSE:UNFI) plunged more than 13% on Tuesday morning despite beating analysts' expectations for revenue and earnings. The company released its fiscal fourth-quarter results after the closing bell on Monday.

Despite Tuesday's decline, the company's stock is still up more than 188% since bottoming on March 12. The Rhode Island-based food distribution company also announced the retirement of CEO Steven L. Spinner.

United Natural Foods announced that Spinner told the board of directors he will be leaving at the end of his current term on July 31, 2021. Analysts have attributed the pullback in the stock price to the retirement announcement.

Highlights from recent results

In the company's fourth-quarter results, United Natural Foods posted earnings of $1.06 per share— up 140.91% year over year and above the consensus estimate of about 74 cents. United Natural Foods' top line for the quarter grew 8% from the same period last year to $6.76 billion. This was also better than projections of $6.63 billion.

The company's earnings were boosted by an income tax benefit of 17.5%, compared to an income tax expense of 56% for the same quarter a year ago. This explains the massive increase in the bottom line as compared to top-line growth.

The gross margin for the quarter improved to 14.81%, up from 14.40% a year ago, while the operating expense margin declined from 13.29% last year to 13.09%.

The company expects to post earnings per share ranging between $3.05 and $3.55 for fiscal 2021 on $27 billion to $27.8 billion in revenue. The company also expects to spend $200 million to $250 million in capital expenditures next year.

Valuation

From a valuation perspective, shares of United Natural Foods are trading at a forward price-earnings ratio of 6.02. This is better than close peers Sysco Corp. (NYSE:SYY) and Performance Food Group Co.'s (NYSE:PFGC) forward price-earnings ratios of 29.85 and 30.21.

The company's price-sales ratio of 0.04 also trumps Sysco's 0.60 and Performance Food's 0.17. As such, shares of United Natural Foods appear to be competitively valued against other players in the market for the coming quarters, and Tuesday's pullback could be an opportunity to buy.

With the current CEO leaving his post next July, however, it would be prudent to monitor the company as the process to find a replacement gets underway.

Disclosure: No position in the stocks mentioned.

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About the author:

Nicholas Kitonyi
Nicholas is the founder of CAGR Value. He is a financial analyst with extensive experience in investment research and stock market analysis. His analysis has been featured on several research sites.

Nicholas has solid knowledge of both U.S. and European markets. His investment style is focused on undervalued plays and growth stocks. Nicholas classifies himself as a swing trader and likes to trade GBP/USD, gold and FTSE 100, among other liquid instruments.

Visit Nicholas Kitonyi's Website


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Comments

Dr. Paul Price
Dr. Paul Price - 2 months ago    Report SPAM

Your estimate of UNFIs forward P/E is way too high.

"2021 Guidance: Net sales of $27B-$27.8B vs. consensus of $26.22B; EPS of $2.55-$3.05 vs. consensus of $2.34; Adj. EPS of $3.05-$3.55; Adj. EBITDA of $690-$730M and Capex of $200M-$250M."

From today's close of $16.54 UNFI now sells for just 5.9x the GAAP midpoint, or 5x this year's adjusted estimate (for FY ending Aug. 31, 2021).

Source: SeekingAlpha.com, UNFI's Management Guidance

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