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United Natural (UNFI) Surges More Than 85% YTD: Here's Why

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United Natural Foods, Inc. (UNFI - Free Report) is on a solid footing, thanks to its key strategic endeavors and lucrative acquisitions. Further, the company has been riding on burgeoning demand stemming from the coronavirus-induced higher at-home consumption.

Thanks to such upsides, shares of this Zacks Rank #1 (Strong Buy) company have surged 87.2% year to date compared with the industry’s growth of 0.2%.

Factors Driving United Natural’s Growth

United Natural is committed to certain strategic targets that include enhancing the customer base, expanding its broad-line distribution channel and improving profitability. To this end, the company is focused on creating a sustainable and solution-based supply-chain network. Additionally, management is on track with improving margins, cash flow and revenue streams. Further, it strives to develop effective sourcing processes to better align supplies with demand, thereby meeting consumers’ needs more efficiently.


 

 

Also, the company has been undertaking various acquisitions over the years to expand its distribution network and customer base and boost long-term growth. In this regard, United Natural completed the buyout of SUPERVALU in October 2018. The enhanced scale of the combined entities has been driving United Natural’s performance. Moreover, the merger provided better competing grounds to the company in the grocery space by augmenting offerings. Apart from these, some other notable acquisitions of the company include Haddon House (in May 2016), Gourmet Guru (in August 2016) and Nor-Cal Produce, Inc (in 2016).

Rising Demand Amid COVID-19, Impressive Outlook

United Natural is gaining from rising demand stemming from the coronavirus-induced higher at-home consumption. This was seen in the fourth quarter of fiscal 2020, with the top and bottom lines increasing year over year and surpassing the Zacks Consensus Estimate. Notably, earnings gained on higher sales and improved gross margin. Further, revenues were backed by robust demand, including benefits from cross selling.

Impressively, management anticipates food-at-home consumption demand to remain elevated, outpacing the demand for away-from-home services for fiscal 2021. United Natural anticipates fiscal 2021 net sales of $27-$27.8 billion that suggests 3.3% growth from fiscal 2020, at midpoint. Further, the company envisions adjusted earnings per share of $3.05-$3.55 for 2021, which indicates an increase of 21.3% from fiscal 2020 levels, at midpoint.

We believe that increased demand amid the pandemic along with the aforementioned upsides is likely to help United Natural stay in investors’ good books.

More Solid Food Bets

Pilgrim’s Pride (PPC - Free Report) , with a Zacks Rank #1, has a long-term earnings growth rate of 2.6%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Blue Apron Holdings (APRN - Free Report) , with a Zacks Rank #2 (Buy), has a trailing four-quarter earnings surprise of 30.3%, on average.

The Hain Celestial (HAIN - Free Report) , with a Zacks Rank #2, has an Earnings ESP of +1.82%.

These Stocks Are Poised to Soar Past the Pandemic

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Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.

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