Earnings Preview: UNFI & COST

This week a number of stocks I follow report earnings: United Foods (UNFI), Costco (COST), Micron (MU), Carmax (KMX) and Nike (NKE). In this blog, I’ll preview the first two.

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UNFI is not an especially well known stock but it is the nation’s leading grocery wholesaler. You might have seen their trucks on the freeway. I’ve long been interested in – and an investor in – the grocery space so UNFI has been on my radar. But I haven’t taken a position – until now.

The stock had been riding high – until two disastrous earnings reports derailed it. On September 27, 2022, UNFI gave initial FY23 EPS guidance of $4.85-$5.15. It reaffirmed that on December 7 but cut it to $3.05-$3.90 on March 8, 2023 and $1.80-$2.30 on June 7. In other words, UNFI has cut its current year EPS guidance by more than half in its last two earnings reports. Not good – and you can see what’s happened to the stock.

But UNFI is still a high quality company in the grocery space. It closed Friday at $18.85 which means the stock is trading at 9x current year EPS guidance. I think there’s value here and plan to initiate a position Monday ahead of earnings Tuesday morning.

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Whereas UNFI has a market cap of around $1 billion, COST is a behemoth at $248 billion. Shares have performed nicely of late and are not far from all time highs around $600. COST shares are not cheap – as usual – but the quality of the company makes it a buy and hold IMO. August comps of +4.1% suggest that everything is going just fine and there is the possibility of a membership fee increase heading into earnings Tuesday afternoon. I see no reason not to stay long.

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