United Natural Foods Added To 'Best Ideas List' At Wedbush

In a report published Wednesday, Wedbush analyst Phil Terpolilli maintained an Outperform rating and $77 price target on

, while adding the stock to its Best Ideas List. "UNFI's store perimeter opportunity and gradual business wins following its Tony's acquisition should provide tailwinds in FY16 and beyond," Terpolilli stated, adding that in UNFI's center-store business, "concern over acceleration in direct distribution at retailers is overblown and sales trends, although sluggish in calendar 1Q and early 2Q, have improved over the last couple months." The analyst believes that the company's top line would benefit significantly from incremental business wins, associated with the Tony's acquisition, in FY16 and beyond. According to the Wedbush report, "The company is already locked in on $100M+ per year in new business starting in July and should gradually win business as they move Tony's nationwide with major retailers, as well as help consolidate and streamline specialty distribution with the products for smaller independent retailers and bodegas." The analyst believes that there is "limited risk" is the company loses any significant amount of business to direct distribution by traditional retailers. On the other hand, while the larger retailers continue to face increasing pressure from direct distribution and private labels, United Foods is expected to be able to grow its business. "A potential pullback in FY16 in distribution center capex by UNFI would improve FCF, while also providing a margin lift since improving recently opened DC margins would not be offset by drags from further openings," Terpolilli added. The analyst expects the stock to see meaningful improvements in valuation over the next 12-18 months.