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United Natural (UNFI) Up 14.1% Since Last Earnings Report: Can It Continue?
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A month has gone by since the last earnings report for United Natural Foods (UNFI - Free Report) . Shares have added about 14.1% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is United Natural due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
United Natural Q4 Earnings Top Estimates, Sales Rise
United Natural reported fourth-quarter fiscal 2022 results, wherein the top and bottom line improved year over year and the latter came ahead of the Zacks Consensus Estimate.
The company remains optimistic as it enters the second year of its Fuel the Future strategy. It remains committed to making investments aimed at speeding up long-term growth, efficiency and value creation, alongside solidifying its balance sheet.
Quarter in Detail
United Natural’s adjusted earnings came in at $1.27 per share compared with the year-ago period figure as well as the Zacks Consensus Estimate of $1.25.
Net sales advanced 8% to $7,273 million but fell short of the Zacks Consensus Estimate of $7,347 million. The year-over-year upside was mainly backed by inflation and new business from current and new customers, including gains from cross-selling. This was somewhat countered by supply chain-related headwinds and lower unit sales growth.
Sales increased across all UNFI’s channels. Chains, Independent retailers, Supernatural and Retail channels witnessed sales growth of 3.7%, 12.4%, 13.5% and 1.3%, respectively. Other channel sales advanced 7.7%.
United Natural’s gross margin (excluding non-cash charges) of 15.2% improved from 15% in the year-ago quarter. The upside was mainly backed by the enhancement in the Wholesale segment’s margin rate, reflecting the effect of inflation and the company’s efficiency efforts. This was partially hurt by adverse changes in the customer mix.
The operating expense rate came in at 13.5% in the quarter under review, compared with adjusted operating expense rate of 13.2% in the year-ago period. The upside was a result of continued investments in servicing customers. This led to elevated transportation and distribution center labor costs and occupancy-related inflation, partly compensated by fixed-cost leverage and gains from United Natural’s efficiency efforts.
Adjusted EBITDA came in at $213 million, up from the $206 million reported in the year-ago quarter.
Other Updates
United Natural ended the quarter with total liquidity of nearly $1.7 billion, including cash of nearly $44 million and borrowing capacity of about $1.6 billion under the company’s asset-backed lending facility. Total outstanding debt (net of cash) was $2.12 billion. The company’s net debt to adjusted EBITDA leverage ratio was 2.6X as of the end of the fourth quarter compared with 2.9X as of the end of the third quarter.
During the fourth quarter, United Natural generated free cash flow of $269 million. This reflects net cash provided by operating activities of $362 million and capital expenditures of $93 million. The company expects capital expenditures of $350 million for fiscal 2023.
On Sep 21, 2022, management approved a new share buyback plan that authorizes the company to buy shares up to $200 million over four years. This replaces the company’s buyback plan announced on Oct 6, 2017.
Fiscal 2023 Guidance
United Natural issued its guidance for fiscal 2023, which is based on its fiscal 2022 results and expectations of sustained momentum.
For fiscal 2023, the company anticipates net sales in the range of $29.8-$30.4 billion. At the midpoint, the metric suggests a 4% rise from the fiscal 2022 reported levels.
The company expects adjusted EBITDA in the range of $850-$880 million, indicating a 4% rise at the midpoint of the guidance. The company anticipates fiscal 2023 adjusted earnings in the range of $4.85-$5.15 per share. At the midpoint, the metric indicates a 4% rise from the fiscal 2022 reported levels.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
VGM Scores
At this time, United Natural has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise United Natural has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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United Natural (UNFI) Up 14.1% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for United Natural Foods (UNFI - Free Report) . Shares have added about 14.1% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is United Natural due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
United Natural Q4 Earnings Top Estimates, Sales Rise
United Natural reported fourth-quarter fiscal 2022 results, wherein the top and bottom line improved year over year and the latter came ahead of the Zacks Consensus Estimate.
The company remains optimistic as it enters the second year of its Fuel the Future strategy. It remains committed to making investments aimed at speeding up long-term growth, efficiency and value creation, alongside solidifying its balance sheet.
Quarter in Detail
United Natural’s adjusted earnings came in at $1.27 per share compared with the year-ago period figure as well as the Zacks Consensus Estimate of $1.25.
Net sales advanced 8% to $7,273 million but fell short of the Zacks Consensus Estimate of $7,347 million. The year-over-year upside was mainly backed by inflation and new business from current and new customers, including gains from cross-selling. This was somewhat countered by supply chain-related headwinds and lower unit sales growth.
Sales increased across all UNFI’s channels. Chains, Independent retailers, Supernatural and Retail channels witnessed sales growth of 3.7%, 12.4%, 13.5% and 1.3%, respectively. Other channel sales advanced 7.7%.
United Natural’s gross margin (excluding non-cash charges) of 15.2% improved from 15% in the year-ago quarter. The upside was mainly backed by the enhancement in the Wholesale segment’s margin rate, reflecting the effect of inflation and the company’s efficiency efforts. This was partially hurt by adverse changes in the customer mix.
The operating expense rate came in at 13.5% in the quarter under review, compared with adjusted operating expense rate of 13.2% in the year-ago period. The upside was a result of continued investments in servicing customers. This led to elevated transportation and distribution center labor costs and occupancy-related inflation, partly compensated by fixed-cost leverage and gains from United Natural’s efficiency efforts.
Adjusted EBITDA came in at $213 million, up from the $206 million reported in the year-ago quarter.
Other Updates
United Natural ended the quarter with total liquidity of nearly $1.7 billion, including cash of nearly $44 million and borrowing capacity of about $1.6 billion under the company’s asset-backed lending facility. Total outstanding debt (net of cash) was $2.12 billion. The company’s net debt to adjusted EBITDA leverage ratio was 2.6X as of the end of the fourth quarter compared with 2.9X as of the end of the third quarter.
During the fourth quarter, United Natural generated free cash flow of $269 million. This reflects net cash provided by operating activities of $362 million and capital expenditures of $93 million. The company expects capital expenditures of $350 million for fiscal 2023.
On Sep 21, 2022, management approved a new share buyback plan that authorizes the company to buy shares up to $200 million over four years. This replaces the company’s buyback plan announced on Oct 6, 2017.
Fiscal 2023 Guidance
United Natural issued its guidance for fiscal 2023, which is based on its fiscal 2022 results and expectations of sustained momentum.
For fiscal 2023, the company anticipates net sales in the range of $29.8-$30.4 billion. At the midpoint, the metric suggests a 4% rise from the fiscal 2022 reported levels.
The company expects adjusted EBITDA in the range of $850-$880 million, indicating a 4% rise at the midpoint of the guidance. The company anticipates fiscal 2023 adjusted earnings in the range of $4.85-$5.15 per share. At the midpoint, the metric indicates a 4% rise from the fiscal 2022 reported levels.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
VGM Scores
At this time, United Natural has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise United Natural has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.