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United Natural Foods (UNFI) Q2 Earnings Top Estimates, Sales Up

United Natural Foods, Inc. UNFI reported second-quarter fiscal 2022 results, with the top and the bottom line beating the Zacks Consensus Estimate. Earnings declined while net sales rose year over year. Management highlighted that all sales channels witnessed year-over-year growth in the quarter.

The company battled various headwinds, including supply chain disruption, accelerating inflation and labor shortages among others. Despite such headwinds, the company is making progress against its six growth pillars, which fueled quarterly performance. Management raised its fiscal 2022 net sales view while reiterating adjusted EBITDA and adjusted earnings per share (EPS) guidance.

 

Q2 in Details

United Natural’s adjusted earnings of $1.13 per share declined 9.6% year over year but surpassed the Zacks Consensus Estimate of $1.10.

Net sales from continuing operations of $7,416 million beat the Zacks Consensus Estimate of $7,185.6 million and rose 7.5% year over year. On a two-year stack basis, net sales increased 14.6%. Accelerating inflation and business gains from existing and new customers, including benefits from cross-selling, were drivers. This was somewhat offset by modest market contraction and supply-chain-related challenges.

The company’s gross margin of 14.5% improved from 14.4% reported in the year-ago quarter. The upside was mainly backed by the enhancement in the Wholesale segment’s margin rate, reflecting the impact of inflation and the ValuePath initiative. The retail gross margin rate improved modestly year over year.

The adjusted operating income was $122 million in the reported quarter compared with $125 million in the year-ago quarter. The adjusted operating margin of 1.65% contracted from the year-ago period’s 1.81%. The downside in adjusted operating income margin was caused by prioritizing customer service investments leading to increased transportation and distribution center labor costs. These were somewhat offset by fixed expenses leverage. The adjusted EBITDA came in at $201 million, down from $206 reported in the year-ago quarter.

The operating expense rate expanded to 12.84% from 12.61% reported in the year-ago quarter.

Other Updates

The company ended the fiscal second quarter with cash and cash equivalents of $45 million, long-term debt of $2,309 million and total shareholders’ equity of $1,683 million. Net cash provided by operating activities amounted to $43 million for 26-weeks ended Jan 29, 2022.


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Fiscal 2022 Guidance

The company’s year-to-date performance and momentum with new and existing customers along with higher expected levels of inflation, the company pulled its net sales view upward. For fiscal 2022, management now anticipates net sales of $28.2-$28.7 billion, up from $27.8-$28.3 billion projected earlier. At the mid-point, the metric suggests a 6% rise from the fiscal 2021 reported levels.

The company expects adjusted EBITDA of $760-$790 million, indicating a 4% rise at the midpoint of the guidance. The company anticipates fiscal 2022 adjusted earnings of $3.90-$4.20 per share. At the midpoint, the metric indicated a 4% rise from the fiscal 2021 reported levels.

The company expects capital expenditures of $300 million for fiscal 2022.

The Zacks Rank #3 (Hold) stock has gained 2% in the past six months against the industry’s decline of 2.3%.

Looking for Solid Food Stocks? Check These

Some better-ranked stocks are Tyson Foods TSN, Pilgrim’s Pride PPC and Flowers Foods FLO.

Tyson Foods, a renowned meat products company, sports a Zacks Rank #1 (Strong Buy) at present. Shares of Tyson Foods have risen 21.2% in the past six months.You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Tyson Foods’ current financial-year sales and EPS suggests growth of 9.5% and 5.6%, respectively, from the year-ago reported number. TSN has a trailing four-quarter earnings surprise of 32.2%, on average.

Pilgrim’s Pride, which produces, processes, markets and distributes fresh, frozen, and value-added chicken and pork products, carries a Zacks Rank #2 (Buy). Shares of Pilgrim’s Pride have moved down 18.2% in the past six months.

The Zacks Consensus Estimate for Pilgrim’s Pride’s current financial-year EPS suggests growth of 19.7% from the year-ago reported number. PPC has a trailing four-quarter earnings surprise of 24.9%, on average.

Flowers Foods, the producer and marketer of packaged bakery products, currently carries a Zacks Rank #2. Shares of Flowers Foods have jumped 7.6% in the past six months.

The Zacks Consensus Estimate for Flowers Foods’ current financial-year sales and EPS suggests growth of 7.2% and 4%, respectively, from the year-ago reported figure. FLO has a trailing four-quarter earnings surprise of 9%, on average.


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