United Natural Foods, Inc. (UNFI - Free Report) has recently approved the authorization of a new $200 million share buyback plan in a bid to boost shareholder value. However, the number and value of shares along with time to repurchase them will be decided by the company, alongside depending on various factors.
As of Sep 14, 2017, United Natural had roughly 50.6 million outstanding shares, which are to be bought back according to the applicable securities laws.
Notably, the company will repurchase shares with cash from operations and borrowings from its credit facility in addition to the available cash funds.
Apart from United Natural, Allergan plc (AGN - Free Report) and Autobytel Inc. have recently sanctioned stock repurchase program to reward shareholders. While Allergan authorized a fresh $2-billion share repurchase program, Autobytel approved to repurchase additional $3 million of its common stock.
United Natural’s Performance
We note that United Natural has been gaining from increased consumer preference for natural and organic brands, in spite of the ongoing industry challenges. Such headwinds include stiff competition, aggressive promotional spending and tight margins.
Recently, United Natural reported fourth-quarter fiscal 2017 results, wherein earnings surpassed the Zacks Consensus Estimate, while revenues lagged. In fact, the company’s top line has missed estimates for 11 consecutive quarters now.
Nevertheless, management expects net sales for fiscal 2018 in the range of $9.6-$9.8 billion, signifying an increase of 3.8-5.8% over the net sales of fiscal 2017. Also, earnings are envisioned in the band of $2.67 to $2.77 per share. The Zacks Consensus Estimate, which has moved up by 6 cents in the last 30 days, is currently pegged at $2.70 for fiscal 2018.
Moreover, acquisitions have been one of the primary growth drivers for United Natural in the past few years. Such acquisitions have aided the company to expand distribution network, footprint and customer base in key markets, along with the launch of new brands. Also, management remains focused on reducing operating expenses and enhancing operating efficiency.
Consequently, this Zacks Rank #3 (Hold) company’s shares have rallied 13.4% in the past month, as against the Zacks Food - Miscellaneous industry’s decline of 2.3%. Currently, the industry is placed at the bottom 32% (175 out of 256) of the Zacks classified industries.
We believe that the latest share buyback program would significantly boost the stock and shareholder return, reflecting the company’s healthy balance sheet and free cash flow.
A better-ranked stock in the same industry includes McCormick and Company, Inc. (MKC - Free Report) , which has a long-term earnings growth rate of 9.4% and sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
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