A month has gone by since the last earnings report for United Natural Foods (UNFI - Free Report) . Shares have lost about 4.3% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is United Natural due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
United Natural Q4 Earnings & Sales Lag Estimates
United Natural Foods reported dismal fourth-quarter fiscal 2019 results. Adjusted earnings of 44 cents per share fell way short of the Zacks Consensus Estimate of 69 cents and tumbled 42.1% year over year. The decline can be attributable to increased tax rate and interest expenses along with lower adjusted operating income.
Net sales amounted to 6,407.1 million, depicting a considerable increase from $2,592.2 million reported in the year-ago quarter. Excluding contributions from SUPERVALU and an additional week in the quarter under review, net sales climbed 2.8% mainly on the back of continued strength in the Supernatural channel. However, the top line missed the Zacks Consensus Estimate of $6,435.2 million.
Meanwhile, the company’s gross margin contracted 167 basis points (bps) to 12.83% due to the inclusion of SUPERVALU, which contributed at a reduced gross profit rate.
Further, the adjusted operating margin fell 158 bps to 0.71% million on account of gross margin shrinkage, somewhat compensated by reduced operating expenses. Nevertheless, adjusted EBITDA shot up significantly to $165.5 million owing to SUPERVALU’s inclusion.
From a channel point of view, Supernatural net sales rose 18.5% year over year, contributing 18.2% to total sales in the fiscal fourth quarter. Excluding SUPERVALU, the segment’s legacy sales improved 10.1%.
Supermarket channel net sales surged massively and contributed roughly 63% to total sales. Excluding SUPERVALU, the segment’s legacy sales dipped 0.9%.
Sales in the Independents channel rose 26.6% and contributed nearly 13% to net sales. Excluding SUPERVALU’s impact, legacy sales in this unit inched up 0.4%.
In the Other channel, net sales surged 55.5% and accounted for 5.8% to United Natural’s top line. Excluding SUPERVALU’s impact, legacy sales in this unit fell 10%.
Other Financial Updates
The company ended the quarter with cash and cash equivalents of $42.4 million, long-term debt of nearly $2,819.1 million and total shareholders’ equity of approximately $1,510.9 million.
In fiscal 2019, net cash provided by operating activities was $284.5 million. Capital expenditures were $207.8 million during the fiscal.
Fiscal 2020 Guidance
For fiscal 2020, management expects net sales of $23.5-$24.3 billion. Adjusted EBITDA is anticipated between $560 million and $600 million. Further, the company envisions adjusted earnings per share of $1.22-$1.76, which reflects a decline from $2.08 reported in fiscal 2019.
The company is firmly focused on its cost-reduction efforts and achieved cost savings of about $70 million in fiscal 2019. Additionally, management retained its long-term target of achieving more than $185 million in cost savings by the end of fiscal 2022.
How Have Estimates Been Moving Since Then?
Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions. The consensus estimate has shifted -65.66% due to these changes.
Currently, United Natural has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top 20% 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.
United Natural has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.