United Natural Foods beat out Wall Street's earnings prediction and increased its full fiscal year guidance on Tuesday. The strong fiscal third-quarter performance — in the face of ongoing supply chain concerns and increased inflation — initially sent UNFI stock sharply higher before it reversed lower on the day.
UNFI Earnings
Estimates: Analysts had predicted earnings per share around $0.97 and revenue of $7.1 billion. Last quarter, the company reported earnings of $1.13 per share and revenue of $7.42 billion.
Results: United Natural reported an earnings per share increase of 37.5% to $1.10. The company also posted $7.2 billion in sales, a 9.2% increase.
Outlook: UNFI updated its full fiscal-year earnings guidance to a range of $3.75-$4.00. That's up from its September 2021 outlook which projected $3.60-$3.90.
"Our third-quarter results again validate our team's ability to successfully perform in the face of a challenging and unpredictable environment with capabilities that we believe will continue to create value for our various stakeholders," CEO Sandy Douglas told investors Tuesday during the earnings call.
Douglas said UNFI expects inflation, record high fuel costs and workforce shortages to persist throughout the fiscal year. However, supply levels for many United Natural products are now increasing, according to Douglas.
The company also believes its diverse offering of premium and value-based products has it well positioned to retain its customers.
"The interesting thing about our customer base and our product line is that we actually show up wherever the customer and the consumer has positioned," Douglas said.
UNFI expects strong revenue to continue and projects annual growth rates in net sales of 3%-5% through fiscal 2024.
Inflation Insight
United Natural is the largest publicly traded wholesale distributor of natural and organic foods in North America. UNFI has more than 30,000 customers, and is the primary supplier for Whole Foods Market.
While UNFI's top-level numbers are strong, the mega-wholesaler has not been immune from the effects of inflation or the rising cost of groceries. The cost of food increased 1% in April, putting overall food prices up more than 9% year-over-year, according to USDA CPI data.
The company reported that its third-quarter revenue was "primarily driven by inflation and new business from both existing and new customers, including the benefit of cross selling, partially offset by supply chain challenges and modest market contraction."
UNFI's operating expenses also increased by 11.6% to $969 million. United Natural explained the increase was a direct result from "higher transportation and distribution center labor costs."
UNFI Stock
UNFI stock briefly rallied nearly 10% higher on Tuesday morning, before reversing to a 3.21% decline in stock market trading.
United Natural, a strong performer through most of the coronavirus pandemic, has been consolidating since December. Tuesday's action sent the stock briefly above a cup-=base buy point at 47.49. Shares cut back below the buy point shortly after the open. United's relative strength line remains below its October and December highs.
UNFI stock had hit a late March 2020 bottom at an intraday low of 5 per share amid the Covid pandemic onset. From there it ratcheted up in stair-step fashion, soaring nearly 500% to a 57.89 high in December.
UNFI stock holds the No. 3 rank among its peers in the food distributors group. Amcon Distributing is No. 2 and Sysco is No. 1 in the Wholesale-Food industry group.
UNFI has a 76 Composite Rating. It's Relative Strength Rating is 90, according to IBD Stock Checkup.
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