Categories Consumer, Earnings

Earnings preview: What to look for when United Natural Foods reports Q3 2019

United Natural Foods (UNFI) is scheduled to release its earnings for the third quarter of 2019 on Wednesday after the market closes. The bottom line will be hurt by goodwill and asset impairment charges as well as restructuring, acquisition, and integration related expenses and increased interest expense.

The top line will be benefited by the consistent strength in product demand across most of its sales channels as well as the Supervalu acquisition. For lifting customer base and distribution network, the company has resorted to acquisitions over the years. In the grocery domain, the company believed the enhanced scale of the combined entities to boost operations efficiency in order to compete against its competitors.

The company remained concerned about the macroeconomic environment that will continue to be challenging in several of its distribution channels. This was driven in part by accelerating store closures, slowing new store growth, and the hyper-competitive chase for consumers.

United Natural Foods (UNFI) Q3 2019 earnings preview
Image Courtesy: United Natural Foods / Facebook post

Analysts expect the company’s earnings to plunge by 50% to $0.52 per share while revenue will surge by 134.80% to $6.22 billion for the third quarter. In comparison, during the previous year quarter, the company posted a profit of $1.04 per share on revenue of $2.65 billion.

United Natural Foods has surprised investors by beating analysts’ expectations twice in the past four quarters. It is expected that the company will report upbeat results for the third quarter. Majority of the analysts recommended a “hold” rating while expecting the stock to reach $13.83 per share in the next 52 weeks.

For the second quarter, the food distributor reported better-than-expected earnings and sales driven primarily by Supervalu purchase. On a GAAP basis, the company recorded a loss compared to a profit a year ago, due to goodwill and asset impairment charges as well as restructuring expenses.

Also read: Campbell Soup Q3 earnings preview

For fiscal 2019, the company expects adjusted earnings in the range of $2.00 to $2.40 per share. Net loss is predicted to be in the range of $6.50 to $6.10 per share. Sales outlook is maintained in the range of $21.5 billion to $22 billion including the benefit of the 53rd week.

The largest driver is the weaker than anticipated Q2 results on the company’s legacy Supervalu wholesale business combined with the updated distribution center realignment expectations. These factors lowered its adjusted EBITDA outlook for fiscal 2019 by $35 million to $40 million. Adjusted EBITDA is now predicted to be in the range of $580 million to $610 million.

Shares of United Natural Foods opened higher on Monday but changed course to the red territory on the NYSE. The stock has fallen over 78% in the past year and over 34% in the past three months.

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