United Natural Foods Is Cheaper Than Sysco For Only The Second Time Since 2008

Canaccord analyst Scott Van Winkle remains bullish on United Natural Foods Inc UNFI following the company’s recent pre-announcement and impressive fiscal 2016 guidance. In a new report, Van Winkle notes that United has now become a better value than rival Sysco Corp SYY for only the second time since 2008.

Pre-Announcement Beat

United pre-announced GAAP EPS of $0.72 to $0.73, a slightly bullish range compared to both Canaccord's estimates of $0.70 and Wall Street’s consensus estimate of $0.72. The revenue range of $2.060-2.065 billion also modestly topped consensus estimates.

Van Winkle notes that these strong numbers are surprising considering the recent struggles by Whole Foods Market Inc WFM.

2016 Guidance

In addition to strong earnings numbers, United’s 2016 guidance also came in above consensus expectations. Canaccord was projecting fiscal 2016 EPS of $2.87, but the company’s latest guidance is for an EPS range of $2.96 to $2.98. Van Winkle sees one possible explanation for the strong guidance.

“At 4-6% projected revenue growth, despite the customer attrition and recent natural channel trends, the guidance implies strong internal growth and potentially some new business wins that haven’t been announced,” Van Winkle speculates.

Attractive Valuation

At its recent price range, United is currently trading at only 16x Canaccord's 2016 EPS estimates, a level that represents more than a 20 percent discount to its historical average. Van Winkle believes that the market will likely eliminate some of this discount following the favorable pre-announcement, and the stock is already trading up by 5.8 percent as of 1:00PM EST on Thursday.

Canaccord maintains its Buy rating on United and its $60 target for the stock.