United Natural (UNFI) Down 1.8% Since Last Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for United Natural Foods (UNFI). Shares have lost about 1.8% 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 the most recent earnings report in order to get a better handle on the important catalysts.
United Natural Reports Q1 Loss, Lags Sales Estimate
United Natural posted first-quarter fiscal 2024 results, wherein the company delivered a narrower-than-expected adjusted loss per share. However, the top line fell short of the Zacks Consensus Estimate while increasing year over year.
Results benefited from improved operational execution, which generated savings from value-creation initiatives. However, declines from procurement gains as a result of reduced levels of inflation were a concern. Management reaffirmed the fiscal 2024 outlook for net sales, adjusted EBITDA and adjusted earnings.
Quarter in Detail
United Natural’s adjusted loss came in at 4 cents per share against earnings of $1.13 reported in the year-ago quarter. The metric was narrower than the Zacks Consensus Estimate of a loss of 26 cents.
Net sales inched up 0.3% to $7,552 million, missing the Zacks Consensus Estimate of $7,563.7 million. The year-over-year upside can be attributed to gains from inflation and new business with existing customers, mainly in the Supernatural channel. However, a decline in units sold was a downside.
Chains, Independent retailers and Retail witnessed sales decline of 1.2%, 2.5% and 1.1%, respectively. Supernatural and Other channels rose 6.5% and 1.7%, respectively.
United Natural’s gross profit fell 6% to $1,030 million. Gross profit was anticipated to decline 8% to $1,007.9 million. Excluding the non-cash LIFO charge in both periods, gross profit dropped 7.2%. Gross margin (excluding non-cash LIFO charges) of 13.7% contracted from 14.8% in the year-ago quarter. The downside can mainly be attributed to reduced levels of procurement gains stemming from decelerating inflation.
Operating expenses were $1,023 million compared with $1,000 million reported in the year-ago quarter. As a percentage of sales, the metric came in at 13.5%, higher than 13.3% reported in the year-ago quarter. Investments in the transformation initiatives were a downside.
Adjusted EBITDA came in at $117 million, down 43.5% from $207 million reported in the year-ago quarter.
Other Updates
The company ended the quarter with total liquidity of nearly $1.29 billion, including cash of nearly $37 million and a borrowing capacity of about $1.25 billion under the company’s asset-backed lending facility. Total outstanding debt (net of cash) was $2.29 billion. Net cash used in operating activities during the fiscal first quarter was $254 million.
Fiscal 2024 Guidance
For the fiscal 2024, the company anticipates net sales in the range of $30.9-$31.5 billion. The company expects adjusted EBITDA in the $450-$550 million range. Net loss is envisioned to be $46-$120 million compared with $36-$110 million expected earlier. The company still anticipates the fiscal 2024 bottom line to be between a loss of 88 cents per share and earnings of 38 cents. The company expects capital expenditures of nearly $400 million for fiscal 2024.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
The consensus estimate has shifted -61.39% due to these changes.
VGM Scores
Currently, United Natural has a poor Growth Score of F, however its Momentum Score is doing a lot better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. 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. Notably, United Natural has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
United Natural is part of the Zacks Food - Miscellaneous industry. Over the past month, Smucker (SJM), a stock from the same industry, has gained 6.3%. The company reported its results for the quarter ended October 2023 more than a month ago.
Smucker reported revenues of $1.94 billion in the last reported quarter, representing a year-over-year change of -12.1%. EPS of $2.59 for the same period compares with $2.40 a year ago.
For the current quarter, Smucker is expected to post earnings of $2.27 per share, indicating a change of +2.7% from the year-ago quarter. The Zacks Consensus Estimate has changed -6.1% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Smucker. Also, the stock has a VGM Score of C.
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United Natural Foods, Inc. (UNFI) : Free Stock Analysis Report
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