The natural, organic and specialty foods distributor was upgraded to "buy" from "neutral" at Jefferies Group (JEF).
The firm said the ratings change was "driven by success of new margin initiative, strong sales momentum, and addition of distribution capacity."
TheStreet Ratings team rates UNITED NATURAL FOODS INC as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:
"We rate UNITED NATURAL FOODS INC (UNFI) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, impressive record of earnings per share growth, compelling growth in net income, good cash flow from operations and solid stock price performance. We feel these strengths outweigh the fact that the company shows low profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 6.4%. Since the same quarter one year prior, revenues rose by 13.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- UNITED NATURAL FOODS INC has improved earnings per share by 21.7% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, UNITED NATURAL FOODS INC increased its bottom line by earning $2.18 versus $1.86 in the prior year. This year, the market expects an improvement in earnings ($2.51 versus $2.18).
- The net income growth from the same quarter one year ago has significantly exceeded that of the Food & Staples Retailing industry average, but is less than that of the S&P 500. The net income increased by 23.6% when compared to the same quarter one year prior, going from $22.62 million to $27.95 million.
- Net operating cash flow has significantly increased by 101.29% to $13.84 million when compared to the same quarter last year. In addition, UNITED NATURAL FOODS INC has also vastly surpassed the industry average cash flow growth rate of -7.09%.
- Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 28.78% over the past year, a rise that has exceeded that of the S&P 500 Index. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
- You can view the full analysis from the report here: UNFI Ratings Report