Will United Natural Earnings Satisfy Bullish Shareholders?

United Natural Foods (UNFI -2.20%) will release its quarterly report on Thursday, and after a good-sized pullback earlier in the year, the stock has climbed to set new all-time record highs in the past month. The shares carry a sizable valuation, but growth in United Natural earnings should be ample enough to satisfy investors who are hungry for strong results.

United Natural has jumped on the healthy-foods trend with a vengeance, taking advantage of its relationships with key natural-foods retailers to bolster its once-niche business. But having operated in what was a small corner of the food distribution market for such a long time, United Natural could start seeing more competition from an industry giant. 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.

Will United Natural earnings stay healthy this quarter?
Analysts have largely left their views on United Natural earnings unchanged in recent months, keeping their July-quarter estimates stable and adding a single penny per share to their fiscal 2014 consensus figures. The stock, though, has climbed markedly, posting gains of more than 14% since early June.

Interestingly, United Natural didn't carry a huge amount of upward momentum forward from its previous quarter. In late May, the company reported April-quarter earnings that featured 9% growth in net income on a 13% jump in sales. Although United Natural boosted its revenue guidance for the fiscal year above previous levels, its narrowing of its range of expected earnings left it below what analysts had expected to see.

But despite any concerns, United Natural remains in a strong position. Key customer Whole Foods Market (WFM) has noted the importance of United Natural in its annual report, citing any potential disruption in its supply relationship as potentially hurting its business. With United Natural making up more than 30% of Whole Foods purchases in the past couple of years, the extension last year of their partnership through 2020 bodes well for both companies.

At the same time, United Natural has other avenues to pursue in expanding its business. Despite a slowdown in growth in its most recent quarter, The Fresh Market (TFM) has seen double-digit percentage increases in sales and earnings that show the breadth of the healthy-food movement. The trend could get even more attention as Fresh Market expands into key Whole Foods areas like California and Texas. Moreover, even traditional grocery chains have boosted their offerings of organic and natural foods, giving United Natural's brands more exposure on store shelves.

The big question in the long run is whether United Natural's success will entice food-distribution giant Sysco (SYY -0.47%) into the natural-food segment. Sysco's own earnings results were tepid at best, with an 11% drop in year-over-year earnings that exposed its vulnerability to rising costs and weak demand from its customers. Pursuing higher-growth opportunities could naturally push Sysco into United Natural's niche, and although Sysco couldn't take over overnight, its economies of scale could pose a long-term threat.

In the United Natural earnings report, watch to see whether the company can finally top expectations. Good news could easily send the stock soaring to new all-time highs once more.

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