United Natural: Time to Buy Organic

06/22/2015 7:00 am EST


Chris Versace

Editor, PowerTrend Bulletin, Growth & Dividend Report, and PowerTrader

One of the strategies that has served us rather well is to use sharp pullbacks to build out a position in a particular stock, suggests Chris Versace, editor of Growth & Dividend Report.

Usually, that happens more often than not when the market clobbers a stock after it misses earnings expectations by a less-than-modest amount.

United Natural Foods (UNFI) reported earnings that grew 15% year over year to $0.83 per share with revenue growing 19% to $2.11 billion.

Those are pretty good growth metrics, far better than most that serve grocery stores. But UNFI shares were down because those figures fell short of Wall Street expectations of $0.86 per share on the bottom line and $2.14 billion on the top line.

On the conference call, the company’s management shared that it now expects earnings of $2.84 to $2.88 per share for the current fiscal year and added that its revenue will be between $8.15 billion and $8.19 billion.

Against those numbers, a miss of $0.03 per share seems rather paltry, particularly given the upbeat comment from CEO Steven Spinner that, “Demand for organic, gourmet, and ethnic products continues to increase and we have seen sales growth accelerate modestly in the first few weeks of our fourth quarter.”

People want healthy foods. The bottom line is that I see this as a blip for United Natural Foods and the impact has put UNFI shares into oversold territory; that’s a great place to scale into the position. Add to your UNFI position at current levels.

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