Heading into this week investors in North American food distributor United Natural Foods (UNFI -1.28%) didn't have much to cheer about. But a week containing positive news can make a big difference in a portfolio's returns.
After the company surprised investors with its fiscal 2024 fourth-quarter results, the stock hit a level it hadn't seen since June of last year. After rocketing higher by as much as 27% this week, United Natural Foods stock was still higher by about 15% in early Friday trading, according to data provided by S&P Global Market Intelligence.
Financials trending positive
United Natural showed strong results in important financial metrics. It reversed declines in gross profit and adjusted earnings that had been declining through the fiscal year. But adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) soared 43% on a comparable basis year over year. Management attributed the solid results to "improving volume trends, new business with existing customers as well as benefits from near-term efficiency initiatives."
While adjusted EBITDA was still down for the full fiscal year, the company was able to meaningfully reduce debt and leverage during the most recent quarterly period. Investors also liked the fiscal 2025 outlook provided by United Natural. While an ongoing optimization strategy will result in a slight sales decline next year, management sees improving adjusted earnings per share and EBITDA.
The company's work to improve profitability and lower debt levels has investors returning to the stock this week. Management sees those trends extending for several years, too. Healthy food trends aren't likely to go away. And with the economy so far avoiding deceleration and recession, United Natural's turnaround appears to be taking hold.
