United Natural Foods, Inc. UNFI started fiscal 2025 on a robust note with first-quarter revenues and earnings surpassing the Zacks Consensus Estimate. Also, both metrics showed year-over-year growth. The solid performance reflects the success of the company’s multi-year strategic plan. This plan focuses on delivering value to customers and suppliers, enhancing operational efficiency, improving free cash flow and reducing net leverage.
United Natural’s stock surged about 20% on Dec. 10, fueled by the company’s better-than-expected results and a raised guidance for fiscal 2025. The upswing was further supported by positive volume growth, improvements in adjusted EBITDA and enhanced free cash flow.
United Natural Foods, Inc. Price, Consensus and EPS Surprise
United Natural Foods, Inc. price-consensus-eps-surprise-chart | United Natural Foods, Inc. Quote
UNFI’s Quarterly Performance: Key Metrics & Insights
United Natural reported adjusted earnings of 16 cents per share for the quarter under review, beating the Zacks Consensus Estimate earnings of 1 cent. The company reported an adjusted loss of 4 cents in the year-ago period.
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Net sales rose 4.2% year over year to $7,871 million, surpassing the Zacks Consensus Estimate of $7,619 million. The increase was driven by a 2% rise in wholesale unit volumes, reflecting new business with existing and new customers, along with the effects of inflation.
Chains, Supernatural and Other Channels experienced year-over-year sales growth of 3.5%, 13.8% and 3.1%, respectively. In contrast, sales for Independent Retailers and Retailers declined by 2.4% and 3.3%, respectively.
Analysis of UNFI’s Costs & Margins
UNFI’s gross profit rose 0.8% year over year to $1,038 million. The gross profit margin of 13.2% contracted 40 basis points (bps) from 13.6% reported in the year-ago quarter. The factors attributable to the decline were lower product margin rates and changes in business mix, partially offset by supplier programs and reduced shrink.
Operating expenses were $1,015 million compared with $1,023 million in the year-ago quarter. As a percentage of sales, operating expenses were 12.9% compared with 13.5% in the year-ago period. The decrease was led by the benefits of cost-saving initiatives and the leveraging impact of increased sales.
Adjusted EBITDA came in at $134 million, up 14.5% from $117 million in the year-ago quarter. This growth marks the fifth consecutive quarter of sequential growth in adjusted EBITDA. The increase was further supported by lower-than-expected costs related to our accounts receivable monetization facility and investment gains, which were more than offset by higher depreciation, amortization and net interest expenses.
UNFI’s Financial Health Snapshot
The company had a total liquidity of $1.17 billion as of Nov. 2, 2024, including cash of nearly $37 million and $1.14 billion under the company’s asset-backed lending facility.
Total outstanding debt, net of cash, reached $2.23 billion at the end of the quarter, representing a $164 million increase over the fourth quarter of fiscal 2024. The net debt to adjusted EBITDA leverage ratio was 4.2 as of Nov. 2, 2024.
United Natural’s Guidance for FY25
For fiscal 2025, the company anticipates net sales of $30.6-$31 billion compared to $30.3-$30.8 billion expected earlier. The company reported net sales of $31 billion in fiscal 2024.
Adjusted EBITDA is expected to be $530-$580 million now, compared with $520-$580 million mentioned earlier. UNFI expects to deliver a net loss of $31-$3 million in fiscal 2025 versus the net loss of $41-$3 million expected earlier.
United Natural envisions fiscal 2025 adjusted earnings between 40 cents and 80 cents versus the previous projection of 20 cents and 80 cents. It reported adjusted earnings of 14 cents in fiscal 2024.
The company projects capital and cloud implementation expenditure of around $300 million for fiscal 2025. It anticipates a free cash flow of more than $100 million for fiscal 2025.
Shares of this Zacks Rank #3 (Hold) company have risen 94.3% in the past three months compared with the industry’s decline of 5.3%.
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Three Stocks Looking Good
We have highlighted three better-ranked stocks from the Consumer Staples sector, namely Ingredion Incorporated INGR, Freshpet FRPT US Foods Holding Corp. USFD.
Ingredion Incorporated manufactures and sells sweeteners, starches, nutrition ingredients and biomaterial solutions derived from wet milling and processing corn and other starch-based materials. The company currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
INGR has a trailing four-quarter earnings surprise of 9.5%, on average. The Zacks Consensus Estimate for Ingredion’s current financial year’s earnings indicates growth of 12.4% from the year-ago reported number.
Freshpet, a pet food company, presently carries a Zacks Rank #2 (Buy). FRPT has a trailing four-quarter earnings surprise of 144.5%, on average.
The Zacks Consensus Estimate for Freshpet’s current financial-year sales and earnings suggests growth of 27.3% and 228.6%, respectively, from the year-ago period’s reported figure.
US Foods, together with its subsidiaries, engages in the marketing, sale and distribution of fresh, frozen and dry food and non-food products to food service customers in the United States. It currently carries a Zacks Rank #2. USFD delivered a negative earnings surprise of 0.4% in the last reported quarter.
The Zacks Consensus Estimate for US Foods Holding’s current fiscal-year sales and earnings indicates growth of 6.4% and 18.6%, respectively, from the prior-year reported levels.
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Freshpet, Inc. (FRPT) : Free Stock Analysis Report
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Ingredion Incorporated (INGR) : Free Stock Analysis Report
US Foods Holding Corp. (USFD) : Free Stock Analysis Report
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