United Natural Foods (UNFI) Q3 Earnings & Sales Top Estimates
United Natural Foods, Inc. UNFI reported strong third-quarter fiscal 2022 results, wherein the top and bottom lines improved year over year and came ahead of the respective Zacks Consensus Estimate. Results reflect the company’s focus on catering to customers even amid a tough operating landscape. The company’s Fuel the Future strategy is working well.
Quarter in Detail
United Natural’s adjusted earnings of $1.10 per share increased 10% from the $1.00 delivered in the year-ago period and surpassed the Zacks Consensus Estimate of 98 cents.
United Natural Foods, Inc. Price, Consensus and EPS Surprise
United Natural Foods, Inc. price-consensus-eps-surprise-chart | United Natural Foods, Inc. Quote
Net sales advanced 9.2% to $7,242 million, beating the Zacks Consensus Estimate of $7,117 million. The upside was mainly backed by inflation and the new business from current and new customers, including gains from cross-selling. This was somewhat countered by a modest market contraction and supply chain-related headwinds.
Sales increased across all UNFI’s channels. Chains, Independent retailers, Supernatural and Retail channels witnessed sales growth of 5.2%, 14.6%, 14.1% and 2%, respectively. Other channels sales advanced 7.9%.
United Natural’s gross margin (excluding non-cash charge) of 15% improved from the 14.7% reported 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 ValuePath initiative. This was partially hurt by adverse changes in the customer mix.
The operating expense rate expanded to 13.4% from the 13.1% reported in the year-ago quarter due to 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 ValuePath initiative.
Adjusted EBITDA came in at $196 million, up from the $185 million reported in the year-ago quarter. This was a result of the gross margin and operating expenses.
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Other Updates
United Natural ended the quarter with cash and cash equivalents of $48 million, long-term debt (including operating and finance lease liabilities) of $3,488 million and total shareholders’ equity of $1,784 million. Net cash used in operating activities amounted to $31 million for the 39 weeks ended Apr 30, 2022.
The company’s net debt to adjusted EBITDA leverage ratio was 2.9 as of the end of the third quarter. Following the third quarter, UNFI entered into a new secured asset-based revolving credit facility worth $2.6 billion, which will mature in 2027. This replaced the company’s earlier credit facility of $2.1 billion, which was slated to mature in 2023.
Fiscal 2022 Guidance
United Natural updated its fiscal 2022 guidance, including the revised definitions of adjusted earnings per share (EPS) and adjusted EBITDA, excluding the impact of the non-cash LIFO charge or benefit. The revised view also reflects higher expectations of the operating performance.
For fiscal 2022, management anticipates net sales in the band of $28.8-$29.1 billion. At the midpoint, the metric suggests a 7% rise from the fiscal 2021 reported levels.
The company expects adjusted EBITDA in the range of $810-$830 million, indicating a 6% rise at the midpoint of the guidance. The company anticipates fiscal 2022 adjusted earnings in the band of $4.65-$4.90 per share. At the midpoint, the metric indicates a 14% rise from the fiscal 2021 reported levels.
The company expects capital expenditures of $250 million for fiscal 2022.
This Zacks Rank #3 (Hold) stock has rallied 16.1% in the past three months compared with the industry’s growth of 1.6%.
3 Solid Staple Stocks
Some better-ranked stocks are Pilgrim’s Pride PPC, Sysco Corporation SYY and Medifast MED.
Pilgrim’s Pride, which produces, processes, markets and distributes fresh, frozen and value-added chicken and pork products, sports a Zacks Rank #1 (Strong Buy). Pilgrim’s Pride has a trailing four-quarter earnings surprise of 31.4%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for PPC’s current financial-year EPS suggests growth of almost 43% from the year-ago reported number.
Medifast, which manufactures and distributes weight loss, weight management, healthy living products and other consumable health and nutritional products, currently sports a Zacks Rank #1. Medifast has a trailing four-quarter earnings surprise of 12.9%, on average.
The Zacks Consensus Estimate for MED’s current financial-year sales and EPS suggests growth of almost 19% and 13.4%, respectively, from the year-ago reported figure.
Sysco, which engages in marketing and distributing various food and related products, carries a Zacks Rank #2 (Buy). Sysco has a trailing four-quarter earnings surprise of 9.1%, on average.
The Zacks Consensus Estimate for SYY’s current financial-year sales and EPS suggests growth of 32.6% and 124.3%, respectively, from the year-ago reported number.
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