United Natural Foods


NASDAQ : US$75.39 
BUY  Target: US$83.00


United Natural Foods is the leading distributor of natural and organic foods in North America.

Raising Target Price

Investment recommendation The robust natural/organic category growth, coupled with UNFI’s position as the leading distributor in the sector, should deliver strong sales/earnings growth.
Investment highlights  UNFI posts in-line EPS on stronger sales despite significant weather and currency challenges that were a combined $0.03 headwind.
 The YoY gross margin improvement trend over the prior two quarters didn’t repeat as weather challenges and currency compounded mix shift, but opex leverage continued.
 F2014 EPS guidance narrowed and raised $0.05 on the low end. Maintaining F2014 and F2015 EPS forecasts on a modest increase in our revenue forecast.
Valuation Shares trade at 29x C2014E EPS and 14x EBITDA, reflecting the favorable growth and margin trends. We maintain our BUY rating and raise our target to $83 from $75, derived as 28x our C2015 EPS estimate (versus prior 25x). The multiple increase reflects the favorable sales growth and expanding valuations across the natural and organic peer group.


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