Can United Natural Foods Ride Whole Foods' Success Over Sysco?

United Natural Foods (UNFI -0.90%) will release its quarterly report on Tuesday, and investors have generally been happy with the natural-foods distributor's performance over the past six months. But as industry giant Sysco (SYY 0.43%) struggles to find new ways to grow, will United Natural be able to take advantage of the natural-foods trends that have vaulted Whole Foods Market (WFM) to the top of the grocery chain world and keep growing at a faster pace?

United Natural is tiny compared to Sysco, with less than a seventh of Sysco's revenue. Yet the natural-foods distributor has done a good job of carving out a hiding place that Sysco hasn't seen fit to tap itself, catering to those seeking top-quality products to cater to customers who are increasingly demanding about food quality. But even with its strong relationship with Whole Foods, can United Natural hold Sysco at bay if the larger rival chooses to make a bigger play in the organic and natural space? Let's take an early look at what's been happening with United Natural Foods over the past quarter and what we're likely to see in its report.

Stats on United Natural Foods

Source: Yahoo! Finance.

Can United Natural keep its earnings growth going?
In recent months, analysts have gotten modestly more excited about United Natural earnings, boosting their October-quarter estimates by a penny per share and their full-year fiscal 2014 projections by double that figure. The stock has also done well, gaining more than 13% since late August.

The biggest part of United Natural's gains came after the company reported earnings for its July quarter. Sales soared 22%, contributing to a 27% jump in earnings per share. Positive guidance on the revenue front sent shares up by double-digit percentages on the news, and with improvement in operating margins, United Natural is working hard to make the most of the growth that it has seen on the top line. That's particularly impressive given the extent to which United Natural relies on Whole Foods as its biggest customer, representing more than a third of United Natural's total sales.

Increasingly, though, United Natural is looking over its shoulder at Sysco. For its part, Sysco has faced struggles lately, with slower sales growth and falling earnings per share forcing the company to look at alternatives to drive revenue higher. But Sysco could easily make a big splash in the natural and organic food space, disrupting both United Natural and popular natural-food brand Hain Celestial in the process.

Still, United Natural has to hope it can profit from Sysco's miscues. Recently, Sysco was criticized for storing meat, dairy, and fresh produce in unrefrigerated public-storage lockers, and although the company reports that it has discontinued the practice, the fallout could drive more customers away from Sysco toward the perceived higher quality of United Natural.

United Natural is also making strategic moves to bolster its growth. In late September, it said it would buy Trudeau Foods, a specialty-food distributor. With Trudeau's upper-Midwestern focus, it should help United Natural grow its presence in delivering high-quality foods in the region and flesh out its already impressive distribution network.

In the United Natural earnings report, watch to see how the company responds directly to Sysco's recent troubles. As long as food customers continue to gravitate toward Whole Foods and other organic and natural-foods retailers, United Natural will remain in a great position to profit from their demand.

Click here to add United Natural Foods to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.