Shares of United Natural Foods (UNFI) rallied in afternoon trading after the company reported better-than-expected quarterly earnings and raised its outlook for fiscal 2016.
WHAT'S NEW: After the market close Monday, United Natural Foods reported Q3 earnings per share of 76c on revenue of $2.13B, compared to analysts' expectations of 66c and $2.16B, respectively. The company also noted that gross margin for the quarter increased to 15.1% from 14.5% in the second quarter. In addition, United Natural Foods updated its outlook for FY16, raising its guidance for adjusted EPS to $2.47-$2.53 from $2.34-$2.44 and raising its view for revenue to $8.46B-$8.5B from $8.31B-$8.43B. Analysts expect the company to report FY16 EPS of $2.39 on revenue of $8.41B. In addition, the company said it expects capital expenditures for FY16 to be approximately $40M-$45M and sees its FY16 tax rate in the range of 39.4%-39.8%. United Natural Foods said that the guidance increase was based on performance, recent acquisitions, and the current outlook for the remainder of the fiscal year.
STREET RESEARCH: After the earnings report, Oppenheimer analyst Rupesh Parikh maintained a Perform rating on United Natural Foods and raised his price target on the shares to $41 from $35, citing "much better than feared" results for Q3. Parikh said his firm is encouraged by the "more aggressive steps" taken by the company to reposition the business over the past few quarters, but adds that the firm was reiterating the Perform rating as intermediate-term earnings outlook is still "very cloudy" with positive merger and acquisition accretion appearing to offset a challenging core business. On the other hand, Standpoint Research downgraded United Natural Foods to Hold from Buy following the earnings report.
PRICE ACTION: In afternoon trading, United Natural Foods surged 16% to $45.05.
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