This Unknown Stock Will Profit From the Natural-Foods Craze

Americans have realized the value of organic and natural foods, and they've rewarded well-known grocery giant Whole Foods Market (WFM) with huge share-price gains in recent years. But if you want to profit from trends like the natural-foods craze, you need to look beyond the obvious plays to discover other companies that are contributing to the industry's success.

One such company is United Natural Foods (UNFI -1.83%), which is slated to release its latest quarterly results on Tuesday. The stock has more than quadrupled since its 2009 lows, reflecting its success in capitalizing on the natural-foods trend. But will the company find new ways to grow? 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 quarterly report.

Stats on United Natural Foods

Source: Yahoo! Finance.

Can United Natural Foods keep cashing in on the organic-food movement?
United Natural Foods has produced strong double-digit sales growth recently, and analysts expect that trend to continue this quarter as well. Expectations for earnings have fallen somewhat in recent months, with Wall Street cutting earnings estimates for the April quarter by a penny per share and full-year estimates by $0.03 per share, but those small moves haven't held back the stock. United Natural shares have risen more than 8% since the end of February.

Most people don't know much about United Natural, but as the main supplier to Whole Foods, the company commands an important place in the organic and natural foods industry. United Natural maintains a huge nationwide distribution network that delivers natural and organic foods from Hain Celestial (HAIN 0.17%) and other major natural-foods producers to grocery stores around the country.

The major concern for United Natural is whether favorable trends in the U.S. economy can continue to give shoppers the financial means to pay higher prices for natural foods. Mainstream groceries Safeway (NYSE: SWY) and Kroger have fought back against Whole Foods by starting to emphasize organic and natural offerings in their own stores, representing a growth opportunity for United Natural, but their ability to continue doing so will depend on their customers being able to afford the higher prices that organic and natural food command.

Another key question for United Natural is whether food-distribution giant Sysco (SYY 0.77%) will enter the natural-foods space more aggressively. So far, Sysco has been content with its commanding lead over the entire industry, leaving United Natural to thrive in its niche. But if Sysco decides that the trend is worth pursuing for greater profits, it could pose a huge threat to United Natural's growth.

In United Natural's report, watch for what the company has to say as a follow-up to its February announcement cutting its expected profits for the rest of the fiscal year. With the natural-foods industry becoming more popular than ever, now's the time when the company really needs to ramp up its game if it wants to capitalize fully on the natural food trend.

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