Stephens Analyst: United Natural Foods Is My New Best Idea

In a report published Friday, Stephens analyst Joe Edelstein named

as the Best Idea for the remainder of 2015. The analyst maintained an Overweight rating on the company, with a price target of $72. United Natural preannounced better-than-expected F4Q15 results and issued a preliminary guidance for 2016. The company guided to a 4-6 percent top line growth and adjusted EPS of $2.86-$2.98 in 2016, which analyst Joe Edelstein said appeared to be a "bit conservative." "We think it potentially sets the Company up to lift the bottom end of its guidance range going forward" Edelstein wrote, while adding, "[W]e are encouraged by +100 bps of accelerated performance into F1Q16, a contract renewal of UNFI's second largest customer, and potential for increased M&A to supplement growth in key regions and product categories." The adjusted EPS estimate for F2016 has been reduced from $3.00 to $2.93. United Natural's shares have declined more than 20 percent since F3Q15 due to a slowdown at its largest customer

and a contract loss with Albertsons. The Stephens report pointed out, however, that the contract termination was a one-time event. United Natural was the lowest cost distributor in its space. Edelstein maintained that the company was poised for robust long-term growth through its retail and supplier partners. "Investors should look at growth across all channels," he added. "We believe pre-announcing F4Q earnings signifies confidence among management that UNFI's business model is not broken," the report mentioned.