Why United Natural Foods stock took off this week

Starting this week investors in the North American food distributor United Natural Foods (UNFI 4.82%) he had little to be happy 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 fourth quarter 2024 results, the stock hit a level not seen since last June. After rising as much as 27 percent this week, United Natural Foods stock was still up about 15 percent in early Friday trading, according to data from S&P Global Market Intelligence.

The financial situation is positive

United Natural showed strong results in important financial metrics. It reversed declines in gross profit and adjusted earnings that fell during the fiscal year. But adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) rose 43% on a comparable basis year-on-year. Management attributed the strong results to “improving volume trends, new business with existing customers, as well as benefits from near-term efficiency initiatives.”

Although adjusted EBITDA was still down for the full fiscal year, the company was able to significantly reduce debt and leverage in the most recent quarterly period. Investors also liked United Natural’s fiscal 2025 outlook. While an ongoing optimization strategy will result in slightly lower sales next year, management sees an improvement in adjusted earnings per share and EBITDA.

The company’s work to improve profitability and reduce debt levels has investors returning to the stock this week. Management sees these trends extending over several years. Healthy eating trends are likely to fade away. And with the economy thus far avoiding deceleration and recession, United Natural’s revival seems to be in order.