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Seaport Global Sticks To The Sidelines On United Natural Foods, Acknowledges 'Stock Is Not Expensive'

Seaport Global Sticks To The Sidelines On United Natural Foods, Acknowledges 'Stock Is Not Expensive'

Grocery distributor company United Natural Foods Inc (NYSE: UNFI) was a clear beneficiary of the COVID-19 pandemic environment amid a major shift towards retail consumer food spending, Seaport Global Securities analysts said in an initiation note.

The United Natural Foods Analyst: Eric Larson initiated coverage of United Natural Foods with a Neutral rating.

The United Natural Foods Thesis: United Natural deserves credit for its "superb" performance during a "very difficult" operating environment, Larson wrote in the note. The company managed to stand out among its peers by sourcing products that others couldn't and this resulted in a new $1 billion annual sales customer, Key Foods Cooperative.

Looking forward, retail grocery sales could remain elevated through the first half of 2021, but it is a "tough call" to model the sales trajectory afterward, the analyst wrote. There is plenty of pent-up demand to dine out, but at the same it is not clear if a large enough number of independent restaurants and away-from-home establishments will "survive" to address the demand.

Related Link: Why This Kraft Heinz Analyst Sees Room For More Upside After 2-Day Rally

Meanwhile, United Natural allocated part of its strong revenue growth to deleverage the balance sheet as its net debt leverage ratio could end 2021 at 3.5 times, or at least a year ahead of management's prior timeline.

Finally, a combination of strong execution and a clear competitive advantage may be factored into the stock's price that is up nearly six-fold since April 2020, the analyst wrote. Nevertheless, the "stock is not expensive" on an EPS or EV/EBITDA multiple basis.

WBA Price Action: Shares of United Natural Foods were trading higher by 3% Friday afternoon at $27.24.

(Photo by Dan Gold on Unsplash)

Latest Ratings for UNFI

Feb 2021Seaport GlobalInitiates Coverage OnNeutral
Jan 2021Wells FargoDowngradesEqual-WeightUnderweight
Jan 2021BarclaysDowngradesEqual-WeightUnderweight

View More Analyst Ratings for UNFI
View the Latest Analyst Ratings


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