Why Piper Jaffray Analysts Are Excited About United Natural Foods

Shares of United Natural Foods hit a 52-week high of $83.91 in February and have sold off since then due poor quarterly results and a challenging outlook.

In a report published Wednesday, Sean Naughton of Piper Jaffray stated that United Natural Foods' fourth-quarter print showed the first sequential improvement in its organic growth rate (6.8 percent) since the fourth quarter of 2013.

Related Link: United Natural Foods Posts In-Line Q4 Profit, Names New CFO

Organic Growth

Naughton continued that during the company's post-earnings conference call, management highlighted it has seen an 8.4 percent organic growth over the past six weeks (i.e., the first six weeks of fiscal 2016). While this figure matches the 8.4 percent the company guided to, it will still be "well received" by investors, as organic growth on a two-year stacked basis is "starting to stabilize" at 18.6 percent.

M&A Pipeline

Naughton further noted that the M&A pipeline remains "robust," with future acquisitions likely centered on gourmet/ethnic and fresh foods – which both serve as key areas of growth moving forward as the company only holds less than a 6 percent market share in each of these categories currently.

Looking Forward

Bottom line, United Natural Foods could continue to see sales momentum in the current quarter, while the investment community has "reset" their expectations and management has offered a "conservative" outlook. As such, the analyst remains "favorable" on the stock given its "depressed" levels.

Shares remain Overweight rated with an unchanged $56 price target.

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