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Lamb Weston (LW) Stock Up More Than 15% in 3 Months: Here's Why
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Lamb Weston Holdings, Inc. (LW - Free Report) looks well placed, courtesy of strategic growth efforts like boosting capacity. The provider of value-added frozen potato products is benefiting from effective pricing efforts. These upsides were seen in its first-quarter fiscal 2023 results, with the top and the bottom line increasing year over year.
The Zacks Rank #1(Strong Buy) stock has gained 15.2% in the past three months against the industry’s 3.8% decline. The stock has comfortably outperformed the Zacks Consumer Staples sector’s 7.5% drop in the period.
Let’s delve deeper.
Strong Q1 Performance, View
Lamb Weston’s first-quarter fiscal 2023 results benefited from pricing actions across all business segments and manufacturing cost-savings undertaken to mitigate inflation. LW’s bottom line came in at 75 cents per share, surging 317%. The upside can be contributed to higher income from operations. Net sales amounted to $1,125.6 million, increasing 14% with growth in all reporting segments. Sales in the Global segment increased 12% to $559.7 million. Foodservice sales increased 14% to $366.3 million. In the Retail segment, sales went up 28% to $169.6 million.
During its fiscal first-quarter earnings release, the company reiterated its fiscal 2023 outlook as it continues to build operating momentum. In its last earnings call, management highlighted that while the macro environment remains volatile, it is on track to deliver results at the high end of the sales target of $4.7-$4.8 billion, with price driving the growth. Management is on track to deliver at the high end of its adjusted diluted earnings per share (EPS) in the band of $2.45-$2.85. The upside can be mainly attributed to sales growth and gross margin expansion.
Image Source: Zacks Investment Research
Pricing Actions Fuel Growth
Lamb Weston’s top line has been benefiting from robust price/mix, as witnessed during the first quarter of fiscal 2023. The price/mix increased 19%, reflecting gains from pricing actions in the company’s core business segments to counter input, manufacturing and transportation cost inflation.
In its last earnings call, management highlighted that it expects to keep realizing the carryover benefit of product pricing actions in the Foodservice and Retail segments during fiscal 2023. In the Global segment, it expects to witness the benefit of pricing actions, including pricing structures for contract renewals.
Efforts to Boost Capacity
Lamb Weston’s sturdy balance sheet and capacity to generate cash keep it well-placed to boost production capacity and fuel long-term growth. For 13 weeks ended Aug 28, 2022, the company’s capital expenditures (including IT expenditure) amounted to $121.2 million, as it continues to construct new French fry lines in Idaho and China. For fiscal 2023, the company expects cash used for capital expenditures in the band of $475-$525 million.
Lamb Weston’s efforts to boost offerings and expand capacity enable the company to meet rising demand conditions for snacks and fries. In September 2022, Lamb Weston unveiled expansion plans for french fry processing capacity in Argentina with the construction of a new manufacturing unit in Mar del Plata, Buenos Aires. In July 2021, the company announced the expansion plan for french fry processing capacity at its existing American Falls, ID facility – with an envisioned capacity to manufacture more than 350 million pounds of frozen french fries and other potato products annually. In March 2021, the company unveiled plans to build a new french fry processing facility in Ulanqab, Inner Mongolia, China.
We believe that such well-chalked expansion efforts and the abovementioned upsides will likely help LW stay in investors’ good books.
Lancaster Colony, which manufactures and markets food products for the retail and foodservice markets, currently sports a Zacks Rank of 1 (Strong Buy). LANC delivered an earnings surprise of 170% in the last reported quarter. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Lancaster Colony’s current financial year sales and EPS suggests growth of 9.6% and 38.3%, respectively, from the corresponding year-ago reported figures.
Hershey, the largest chocolate manufacturer in North America as well as a global leader in chocolate and non-chocolate confectionery, presently has a Zacks Rank #2 (Buy). HSY pulled off a trailing four-quarter earnings surprise of 8.7%, on average.
The Zacks Consensus Estimate for Hershey’s sales and EPS for the current financial year suggests respective growth of 13.9% and 14.4% from the year-ago reported figures.
J. M. Smucker, which manufactures and markets branded food and beverage products, carries a Zacks Rank #2. J. M. Smucker delivered a trailing four-quarter earnings surprise of 20.8%, on average.
The Zacks Consensus Estimate for SJM’s current financial year sales suggests growth of 4.4% from the year-ago period’s reported figure.
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Lamb Weston (LW) Stock Up More Than 15% in 3 Months: Here's Why
Lamb Weston Holdings, Inc. (LW - Free Report) looks well placed, courtesy of strategic growth efforts like boosting capacity. The provider of value-added frozen potato products is benefiting from effective pricing efforts. These upsides were seen in its first-quarter fiscal 2023 results, with the top and the bottom line increasing year over year.
The Zacks Rank #1(Strong Buy) stock has gained 15.2% in the past three months against the industry’s 3.8% decline. The stock has comfortably outperformed the Zacks Consumer Staples sector’s 7.5% drop in the period.
Let’s delve deeper.
Strong Q1 Performance, View
Lamb Weston’s first-quarter fiscal 2023 results benefited from pricing actions across all business segments and manufacturing cost-savings undertaken to mitigate inflation. LW’s bottom line came in at 75 cents per share, surging 317%. The upside can be contributed to higher income from operations. Net sales amounted to $1,125.6 million, increasing 14% with growth in all reporting segments. Sales in the Global segment increased 12% to $559.7 million. Foodservice sales increased 14% to $366.3 million. In the Retail segment, sales went up 28% to $169.6 million.
During its fiscal first-quarter earnings release, the company reiterated its fiscal 2023 outlook as it continues to build operating momentum. In its last earnings call, management highlighted that while the macro environment remains volatile, it is on track to deliver results at the high end of the sales target of $4.7-$4.8 billion, with price driving the growth. Management is on track to deliver at the high end of its adjusted diluted earnings per share (EPS) in the band of $2.45-$2.85. The upside can be mainly attributed to sales growth and gross margin expansion.
Image Source: Zacks Investment Research
Pricing Actions Fuel Growth
Lamb Weston’s top line has been benefiting from robust price/mix, as witnessed during the first quarter of fiscal 2023. The price/mix increased 19%, reflecting gains from pricing actions in the company’s core business segments to counter input, manufacturing and transportation cost inflation.
In its last earnings call, management highlighted that it expects to keep realizing the carryover benefit of product pricing actions in the Foodservice and Retail segments during fiscal 2023. In the Global segment, it expects to witness the benefit of pricing actions, including pricing structures for contract renewals.
Efforts to Boost Capacity
Lamb Weston’s sturdy balance sheet and capacity to generate cash keep it well-placed to boost production capacity and fuel long-term growth. For 13 weeks ended Aug 28, 2022, the company’s capital expenditures (including IT expenditure) amounted to $121.2 million, as it continues to construct new French fry lines in Idaho and China. For fiscal 2023, the company expects cash used for capital expenditures in the band of $475-$525 million.
Lamb Weston’s efforts to boost offerings and expand capacity enable the company to meet rising demand conditions for snacks and fries. In September 2022, Lamb Weston unveiled expansion plans for french fry processing capacity in Argentina with the construction of a new manufacturing unit in Mar del Plata, Buenos Aires. In July 2021, the company announced the expansion plan for french fry processing capacity at its existing American Falls, ID facility – with an envisioned capacity to manufacture more than 350 million pounds of frozen french fries and other potato products annually. In March 2021, the company unveiled plans to build a new french fry processing facility in Ulanqab, Inner Mongolia, China.
We believe that such well-chalked expansion efforts and the abovementioned upsides will likely help LW stay in investors’ good books.
Other Stocks to Consider
Some top-ranked stocks are Lancaster Colony (LANC - Free Report) , Hershey (HSY - Free Report) and The J. M. Smucker (SJM - Free Report) .
Lancaster Colony, which manufactures and markets food products for the retail and foodservice markets, currently sports a Zacks Rank of 1 (Strong Buy). LANC delivered an earnings surprise of 170% in the last reported quarter. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Lancaster Colony’s current financial year sales and EPS suggests growth of 9.6% and 38.3%, respectively, from the corresponding year-ago reported figures.
Hershey, the largest chocolate manufacturer in North America as well as a global leader in chocolate and non-chocolate confectionery, presently has a Zacks Rank #2 (Buy). HSY pulled off a trailing four-quarter earnings surprise of 8.7%, on average.
The Zacks Consensus Estimate for Hershey’s sales and EPS for the current financial year suggests respective growth of 13.9% and 14.4% from the year-ago reported figures.
J. M. Smucker, which manufactures and markets branded food and beverage products, carries a Zacks Rank #2. J. M. Smucker delivered a trailing four-quarter earnings surprise of 20.8%, on average.
The Zacks Consensus Estimate for SJM’s current financial year sales suggests growth of 4.4% from the year-ago period’s reported figure.