Image source: United Natural Foods, Inc.

What: Shares of United Natural Foods, Inc. (NYSE:UNFI) were up 14.4% as of 12:15 p.m. EDT Tuesday after the natural and organic food distributor released stronger-than-expected fiscal third-quarter 2016 earnings and increased its full-year guidance.

So what: Quarterly revenue climbed 0.8% year over year, to $2.13 billion, and would have risen 6.1% had it not been for the impact of a previously disclosed termination of a customer distribution contract. That translated to an 8.4% decline in net income, to $38.3 million, or $0.76 per diluted share, compared to net income of $41.8 million, or $0.83 per share in the same year-ago period. But keep in mind that last year's fiscal third quarter included a $4.2 million gain associated with a transfer of land at United Natural Foods' Prescott, Wisconsin facility. Meanwhile, operating cash flow was $81 million for the quarter, and free cash flow came in at $72.4 million.

Analysts, on average, were anticipating United Natural Foods would generate higher revenue of $2.16 billion, but lower earnings of $0.66 per share.

United Natural Foods also announced that, through its wholly owned subsidiary Albert's Organics, it has acquired certain assets of Global Organic Specialty Source, Inc. 

United Natural Foods CEO Steven Spinner added:

We are intently focused on managing our business in a rapidly changing environment. We will make strategic investments to improve our sales growth rate and customer experience through the back half of this fiscal year and into fiscal 2017. We are working to build new distribution opportunities and expand our relationships with current customers. Our announcement today of the acquisition of certain assets of Global Organic further demonstrates our strategic focus on increasing UNFI's product offering into the perishable perimeter. We believe our infrastructure, supply chain and logistics network are uniquely positioned to add meaningful value to customers in an evolving food retail environment.

Now what: Looking forward, United Natural Foods now anticipates full fiscal-year 2016 revenue of roughly $8.46 billion to $8.50 billion, representing year-over-year growth of 3.4% to 3.8%. Based on generally accepted accounting principles (GAAP), that should translate to earnings per diluted share of $2.39 to $2.45. On an adjusted (non-GAAP) basis, which excludes severance and other transition costs related to restructuring following the customer distribution agreement termination, earnings per diluted share should be $2.47 to $2.53.

By comparison, United Natural Foods' previous guidance called for full-year revenue of $8.31 billion to $8.43 billion, and adjusted earnings per share of $2.34 to $2.44. And analysts' consensus estimates predicted full fiscal-year revenue of just $8.41 billion, and adjusted net income of $2.38 per share.

In the end, with its slight top-line shortfall in fiscal Q3 notwithstanding, this is a fairly straightforward beat and raise from United Natural Foods. Assuming the company can continue driving modest top- and bottom-line gains through a combination of healthy organic growth and strategic acquisitions, I see no reason the stock price won't follow suit.

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