United Natural Foods is a Buy Before Earnings UNFI is spiking higher in advance of the company's fourth-quarter 2021 earnings scheduled for September 28. An expected earnings beat combined with bu...

United Natural Foods (NYSE: UNFI) is spiking higher in advance of the company's fourth-quarter 2021 earnings scheduled for September 28 before the market opens. This would continue a trend that has seen the UNFI stock climb 6.2% in the last 30 days.

However, on balance UNFI stock has been difficult to figure out. On the one hand, the stock is up 131% in 2021. On the other hand, the stock is down 10% since closing at $41.57 a share in early June. The concern seems to be slowing revenue and earnings growth as the company now begins to deliver year-over-year comparisons to the blowout numbers the company delivered during the pandemic.

If that's the case, then a positive earnings report should allow the stock to continue the bullish trend. And the whisper number has the company posting 84 cents in earnings per share on revenue of $6.85 billion. That would be higher than the consensus estimate of 81 cents in earnings per share.

Both numbers would also be within the full-year guidance that the company maintained on last quarter's earnings call.

Slowing Growth is Still Growth

United Natural Foods delivered over 19% year-over-year (YOY) revenue growth between fiscal 2019 and fiscal 2020. That's not surprising. The company is the primary wholesale grocery distributor for Whole Foods Market. And with Whole Foods operating as a wholly-owned subsidiary of Amazon, it made sense that the company would achieve strong revenue growth as individuals stocked their pantries and did more cooking at home.

It's also why some analysts were concerned that the fiscal year 2021 would bring slower growth. And that is the case. If the company delivers the forecasted $6.85 billion quarterly revenue, they will post just over $27 billion in revenue for the fiscal year. That would be 5% YOY growth.

A similar story is playing out with the company's earnings. The company is on pace to deliver $3.54 earnings per share for the year. That would be a 22% YOY increase. However, that would be a marked slowdown from the 39% YOY increase the company delivered between 2019 and 2020.

On the company's last earnings call, UNFI reported that they are adding $1.5 billion of new business that should be accretive to the balance sheet in 2022. But as the company's stock moves higher ahead of earnings, it will raise questions about how much of the growth is priced into UNFI stock.

A Barometer of Inflation

On the company's last earnings call, company president Christopher Testa remarked that the company had not, to date, been significantly impacted by inflation. Testa did make a point of saying they were expecting that to change. However, he also noted that the company's business model was generally able to pass along those cost increases throughout their supply chain.

If that is in fact the case when the company reports, that should give analysts the confidence that inflation shouldn't take too much of a bite out of revenue growth in 2021.

Is Future Growth Priced In

The company is likely to report solid earnings, but it's not what analysts appear to be looking for. According to MarketBeat's consensus price target estimates from analysts, UNFI stock will fall over 25% from its current level.

This would fit the narrative that investors are looking for home runs and the company is delivering singles. And although there's no indication that short interest is on the rise, investors should be careful that this isn't a buy the rumor sell the news event.

But right now, the technical indicators for UNFI stock look favorable. The stock is consolidating into a tight range and finding higher levels of support along the 20-day moving average.