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United Natural (UNFI) Q3 Earnings to Gain on Solid Demand

Zacks Equity Research

United Natural Foods, Inc. UNFI is likely to report top and bottom-line growth for third-quarter fiscal 2020. The Zacks Consensus Estimate for earnings in the third quarter is currently pegged at $1.41 per share compared with 61 cents reported in the year-ago period. The consensus mark has increased significantly over the past 30 days. Further, the consensus mark for revenues stands at $6,432 million, indicating an increase of 7.9% from the year-ago period’s reported figure.

Notably, United Natural delivered a positive earnings surprise of 18.5% in the last reported quarter. However, it has underperformed the Zacks Consensus Estimate by 11.5%, on average, in the trailing four quarters.

United Natural Foods, Inc. Price and EPS Surprise

United Natural Foods, Inc. Price and EPS Surprise


United Natural Foods, Inc. price-eps-surprise | United Natural Foods, Inc. Quote

Key Factors to Note

United Natural released solid preliminary results for third-quarter fiscal 2020 and highlighted that customer demand for its conventional as well as natural products soared toward the third-quarter beginning and remained high. Markedly, increased social distancing and stay-at-home trends led by coronavirus have spiked up demand for several staple products.

We note that the company has been focused on meeting the surging demand amid the crisis, thanks to its front-line distribution center, transportation and retail workers. The rising demand along with the company’s integration and synergy efforts led to robust preliminary results for the third quarter. Net sales advanced 12% to $6,668 million. Adjusted EBITDA jumped 32% to $222 million and adjusted earnings per share more than doubled to $1.40 per share.

Results were backed by robust coronavirus-led demand, which helped the company leverage fixed costs and capitalize on synergy and integration initiatives associated with the buyout of Supervalu (concluded in October 2018). Incidentally, the enhanced scale of the combined entities has aided United Natural’s performance. Moreover, the merger has provided better competing grounds for the company in the grocery space with augmented offerings. The preliminary results were driven by gains from the Cub and Shoppers retail banners. However, results also reflect incremental costs associated with the pandemic, like expenses to ensure safety measures at distribution centers and retail outlets along with temporary COVID-19-related incentives.

United Natural has been committed to its strategic targets, such as expanding the customer base and the broad line distribution channel, and improving profitability. To this end, the company has been focusing on creating an efficient supply-chain network.

What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for United Natural this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But this is not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

United Natural has a Zacks Rank #1 and an Earnings ESP of 0.00%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks With Favorable Combinations

Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat.

Conagra Brands CAG has an Earnings ESP of +5.39% and a Zacks Rank #2.

General Mills GIS has an Earnings ESP of +0.76% and a Zacks Rank #2.

Smucker SJM has an Earnings ESP of +4.33% and a Zacks Rank #2.

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