4 Factors That Make United Natural A Solid Pick In 2018

United Natural Foods, Inc. (NASDAQ:UNFI) has been investor’s preferred pick for quite some time, as evident from its solid bull run. This Zacks Rank #2 (Buy) stock has rallied 47.6% in the past six months, outperforming the industry’s decline of 1.7%.

United Natural has been riding on effective growth policies. Moreover, a favorable outlook for fiscal 2018 bolsters investor’s optimism on the stock. Let’s take a look into some the factors that have been aiding this leading food distributor’s performance and are likely to help it sustain the momentum.

Growth in E-commerce

Amongst management’s strategies to enhance performance, e-commerce expansion is a priority. To this end, United Natural strives to strengthen e-commerce space by investing in technology and infrastructure. Driven by such efforts, e-commerce sales jumped more than 30% in the first quarter of fiscal 2018, wherein the food service e-commerce sales recorded highest quarter of year-over-year growth. United Natural’s efforts to expand online operations encouraged management to project robust opportunities in this space, backed by impressive distribution network and solid brands portfolio.

Acquisitions: An important Growth Driver

The company has been carrying out various acquisitions over the years to enhance brand portfolio, distribution network, customer base and boost long-term growth. United Natural acquired Haddon House in May 2016 and Gourmet Guru in Aug 2016, which have been contributing to sales. The Gourmet Guru deal helped the company in finding and cultivating emerging fresh and organic brands. It also expanded United Natural’s presence in key urban markets. United Natural’s acquisition of Haddon House Food Products provided greater operating scale and resources to develop product and service offering.

Other strides in this regard include United Natural’s buyout of Nor-Cal Produce, Inc (in 2016), Tony’s Fine Foods (in 2014) and Trudeau Distributing Company (in 2013) among many others.

Initiatives to Improve Operating Efficiencies

United Natural has been striving to improve operational efficiencies and has made solid progress in this regard. The company is on track with restructuring plan to curtail expenses to achieve greater efficiency in a highly promotional environment. Moreover, in order to allocate resources diligently, the company has been exiting from less profitable businesses.

Solid Q1, Positive on the Road Ahead

The aforementioned growth initiatives helped United Naturals to retain its impressive earnings record in the first quarter of fiscal 2018. Both top and bottom lines improved year over year and surpassed estimates. While earnings marked its third straight beat, revenues crushed its 11-quarter long trend of reporting negative surprises. Solid focus on growth initiatives along with robust consumer demand in all channels fueled results. Evidently sales improved 7.9% year over year during the said period.

Management is impressed with the company’s stellar start in fiscal 2018. Additionally, the company continued to witness record sales and shipping unit volumes in the second quarter. Management believes that it is well placed for growth, considering consumers’ strong demand for United Natural’s better-for-you food products and services in all channels including retails stores, food service, e-commerce and international.

This encouraged management to raise its previously issued sales and earnings view for fiscal 2018. Management currently expects net sales for fiscal 2018 to grow in a range of 6.2-7.8% to $9.84-$10.0 billion. The company also envisions earnings in the range of $2.72-$2.80 per share, which reflects an improvement of about 6.3-9.4% from the fiscal 2017 figure.

All said, United Natural is expected to continue with sturdy performance on the back of dedicated efforts to tap growth opportunities.

Do Consumer Staples Stocks Grab Your Attention? Check These

Investors interested in the same sector may consider stocks such as Estee Lauder Companies Inc (NYSE:EL) , Conagra Brands Inc (NYSE:CAG) and Meredith Corporation (NYSE:MDP) , all carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Estee Lauder came up with an average positive earnings surprise of 18% in the trailing four quarters. It has a long-term earnings growth rate of 12.5%.

Conagra Brands pulled off an average positive earnings surprise of 7% in the trailing four quarters. Also, it has a long-term earnings growth rate of 7%.

Meredith Corporation delivered an average positive earnings surprise of 7.1% in the trailing four quarters. It has a long-term earnings growth rate of 8%.

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