Conagra Brands (CAG - Free Report) and Lamb Weston (LW - Free Report) crushed their fiscal second-quarter earnings expectations yesterday.
With both Conagra and Lamb Weston stocks recently hitting their 52-week highs, let’s see if it’s time to buy and ride the momentum after their impressive quarters.
Overview & Q2 Reports
Lamb Weston’s impressive quarter saw the company blast EPS expectations by 73% on earnings of $1.28 per share. The company also beat top line estimates by 10% with revenues of $1.28 billion, up roughly 27% from a year ago.
The frozen potato producer attributed strong sales to solid demand across its restaurant and foodservice sales channels in North America which drove volume growth.
Net sales for Lamb Weston’s Foodservice segment, which serves North American foodservice distributors and restaurant chains increased $72.8 million to $313.9 million, up 30% from Q2 2021.
The Global segment that includes the top 100 North American-based restaurant chain customers as well as Lamb Weston’s international sales, increased $40.8 million to $516.7 million, up 9% from the prior-year quarter.
Pivoting to Conagra, the company also posted a nice earnings surprise, beating expectations by 23% with EPS of $0.81 during its fiscal Q2. Sales also slightly beat by 1% at $3.31 billion.
Conagra attributed its solid second-quarter results to the ongoing strength of its brands, which include Hunt’s, Healthy Choice, and Slim Jim, among others. Outside of this, the food company stated its successful execution of the “Conagra Way playbook” led to its robust top line growth, margin recovery, and earnings results.
Conagra’s Refrigerated and Frozen net sales increased 10.5% to $1.4 billion with Foodservice increasing 14.8% to $283 million.
Recent Performance & Valuation
Lamb Weston and Conagra Brands stocks are enjoying nice price action following their earnings beat as shown in the nearby chart.
LW stock is up 13% since reporting and CAG shares are up 5%. Over the last two years, LW’s total return including dividends is now +35% and CAG is up+28%, with both stocks largely outperforming the benchmark.
Lamb Weston’s momentum has the stock on the cusp of eclipsing the $100 a share range and currently trades at 31.6X forward earnings. Conagra stock has eclipsed $40 a share and trades at 16.2X forward earnings.
Conagra’s valuation sticks out trading below the S&P 500’s 17.1X and nicely below its five-year high of 20.1X, and closer to the median of 14.3X. Lamb Weston trades well below its decade-long high of 45.3X but further above its median of 25.8X.
Growth & Outlook
Lamb Weston earnings are now expected to pop 46% in fiscal 2023 and jump another 28% in FY24 at $3.90 per share. Earnings estimates are slightly up over the last 60 days. Sales are expected to be up 14% this year and rise another 14% in FY24 to $5.39 billion.
Turing to Conagra, earnings are projected to be up 4% in FY23 and rise another 5% in FY24 at $2.59 per share. Earnings estimates have also trended higher for Conagra over the last quarter. On the top line, sales are forecasted to rise 6% this year and another 1% in FY24 to $12.34 billion.
Dividends & Buybacks
Stellar earnings results can lead to dividend increases and stock buybacks. This is the case with Lamb Weston stock, as the company announced a 4% increase in its quarterly dividend and repurchased $50 million of common stock on top of increasing its share repurchase authorization by $250 million.
Conagra didn’t raise its dividend following its strong fiscal Q2 but already has a solid 3.30% dividend yield that tops Lamb Weston’s 1.02%. Conagra recently announced a $750 million increase to the company’s share repurchase authorization in December that will transpire periodically over several years.
Bottom Line
Lamb Weston and Conagra Brands continue to look like strong investments as we start the new year. Conagra stock appears very attractive from a P/E valuation standpoint with earnings estimates rising for both FY23 and FY24 landing the stock a Zacks Rank #2 (Buy).
Lamb Weston’s valuation doesn’t stand out as much but its growth has been impressive with earnings estimates revisions slightly up. For now, the stock lands a Zacks Rank #3 (Hold). The higher repurchase authorizations by both companies are reassuring to investors and these stocks could continue to outperform the broader market in 2023 continuing their ability to hedge against inflation.
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It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
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Conagra Brands (CAG - Free Report) and Lamb Weston (LW - Free Report) crushed their fiscal second-quarter earnings expectations yesterday.
With both Conagra and Lamb Weston stocks recently hitting their 52-week highs, let’s see if it’s time to buy and ride the momentum after their impressive quarters.
Overview & Q2 Reports
Lamb Weston’s impressive quarter saw the company blast EPS expectations by 73% on earnings of $1.28 per share. The company also beat top line estimates by 10% with revenues of $1.28 billion, up roughly 27% from a year ago.
The frozen potato producer attributed strong sales to solid demand across its restaurant and foodservice sales channels in North America which drove volume growth.
Net sales for Lamb Weston’s Foodservice segment, which serves North American foodservice distributors and restaurant chains increased $72.8 million to $313.9 million, up 30% from Q2 2021.
The Global segment that includes the top 100 North American-based restaurant chain customers as well as Lamb Weston’s international sales, increased $40.8 million to $516.7 million, up 9% from the prior-year quarter.
Pivoting to Conagra, the company also posted a nice earnings surprise, beating expectations by 23% with EPS of $0.81 during its fiscal Q2. Sales also slightly beat by 1% at $3.31 billion.
Conagra attributed its solid second-quarter results to the ongoing strength of its brands, which include Hunt’s, Healthy Choice, and Slim Jim, among others. Outside of this, the food company stated its successful execution of the “Conagra Way playbook” led to its robust top line growth, margin recovery, and earnings results.
Conagra’s Refrigerated and Frozen net sales increased 10.5% to $1.4 billion with Foodservice increasing 14.8% to $283 million.
Recent Performance & Valuation
Lamb Weston and Conagra Brands stocks are enjoying nice price action following their earnings beat as shown in the nearby chart.
LW stock is up 13% since reporting and CAG shares are up 5%. Over the last two years, LW’s total return including dividends is now +35% and CAG is up+28%, with both stocks largely outperforming the benchmark.
Lamb Weston’s momentum has the stock on the cusp of eclipsing the $100 a share range and currently trades at 31.6X forward earnings. Conagra stock has eclipsed $40 a share and trades at 16.2X forward earnings.
Conagra’s valuation sticks out trading below the S&P 500’s 17.1X and nicely below its five-year high of 20.1X, and closer to the median of 14.3X. Lamb Weston trades well below its decade-long high of 45.3X but further above its median of 25.8X.
Growth & Outlook
Lamb Weston earnings are now expected to pop 46% in fiscal 2023 and jump another 28% in FY24 at $3.90 per share. Earnings estimates are slightly up over the last 60 days. Sales are expected to be up 14% this year and rise another 14% in FY24 to $5.39 billion.
Turing to Conagra, earnings are projected to be up 4% in FY23 and rise another 5% in FY24 at $2.59 per share. Earnings estimates have also trended higher for Conagra over the last quarter. On the top line, sales are forecasted to rise 6% this year and another 1% in FY24 to $12.34 billion.
Dividends & Buybacks
Stellar earnings results can lead to dividend increases and stock buybacks. This is the case with Lamb Weston stock, as the company announced a 4% increase in its quarterly dividend and repurchased $50 million of common stock on top of increasing its share repurchase authorization by $250 million.
Conagra didn’t raise its dividend following its strong fiscal Q2 but already has a solid 3.30% dividend yield that tops Lamb Weston’s 1.02%. Conagra recently announced a $750 million increase to the company’s share repurchase authorization in December that will transpire periodically over several years.
Bottom Line
Lamb Weston and Conagra Brands continue to look like strong investments as we start the new year. Conagra stock appears very attractive from a P/E valuation standpoint with earnings estimates rising for both FY23 and FY24 landing the stock a Zacks Rank #2 (Buy).
Lamb Weston’s valuation doesn’t stand out as much but its growth has been impressive with earnings estimates revisions slightly up. For now, the stock lands a Zacks Rank #3 (Hold). The higher repurchase authorizations by both companies are reassuring to investors and these stocks could continue to outperform the broader market in 2023 continuing their ability to hedge against inflation.
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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