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Lamb Weston (LW - Free Report) , a Zacks Rank #1 (Strong Buy), has been a substantial beneficiary of the recovery in the foodservice business. LW has been bucking the market’s downtrend this year on the heels of higher prices for its product offerings. The company is a component of the Zacks Consumer Staples sector, which currently ranks in the top 38% out of all Zacks Ranked Sectors. LW sports a second-best ‘B’ rating in our Zacks Momentum Style Score category, indicating a strong likelihood that the stock’s outperformance will continue.
Lamb Weston is part of the Zacks Food – Miscellaneous industry group, which ranks in the top 27% out of approximately 250 industries. This group is essentially flat on the year, all while the general market has experienced a painful correction. Because it is ranked in the top half of all industry groups, we expect this group to outperform the market over the next 3 to 6 months.
Historical research studies suggest that approximately half of a stock’s price appreciation is due to its industry grouping. In fact, the top 50% of Zacks Ranked Industries outperforms the bottom 50% by a factor of more than 2 to 1. It’s no secret that investing in stocks that are part of leading industry groups can give us a leg up relative to the market. By focusing on leading stocks within the top 50% of Zacks Ranked Industries, we can dramatically improve our stock-picking success.
Company Description
Lamb Weston is a global producer, marketer, and distributor of frozen potato products. The company offers frozen potatoes, commercial ingredients, and appetizers under the Lamb Weston brand, in addition to other licensed brands and various customer labels. LW is also engaged in the vegetable and dairy business. It serves retail and foodservice customers, specialty retailers, convenience stores, and both independent and chain restaurants. Lamb Weston was founded in 1950 and is headquartered in Eagle, ID.
Product volumes continue to benefit from a rebound in demand at full-service restaurants and non-commercial channels, like lodging and hospitality. The company has increased prices on its products to counteract higher input, manufacturing, and transportation costs. LW’s efforts to boost offerings and expand capacity have enabled it to effectively meet rising demand conditions for products such as fries and snacks.
Earnings Trends and Future Estimates
LW has exceeded earnings estimates in three of the past four quarters. Back in April, the company reported fiscal Q3 EPS of $0.73 per share, marking a 65.91% surprise over the $0.44 consensus estimate. LW has delivered a trailing four-quarter average earnings surprise of 18.1%.
Earnings estimates for the upcoming announcement have seen positive changes as of late. The fiscal Q4 consensus estimate has been revised upward by 2% to $0.51 per share in just the past 7 days. If the company is able to achieve this, it would translate to growth of 15.91% relative to the same quarter last year. Sales are expected to climb 6.03% to $1.07 billion.
What the Zacks Model Reveals
The Zacks Earnings ESP (Expected Surprise Prediction) seeks to identify companies that have recently witnessed positive earnings estimate revision activity. The technique has proven to be quite useful for finding positive surprises. In fact, when combining a Zacks Rank #3 or better with a positive Earnings ESP, stocks produced a positive surprise 70% of the time according to our 10-year backtest.
LW boasts a +0.99% Earnings ESP for the fiscal fourth quarter. Another earnings beat may be in the cards when the company reports these results on July 27th.
The future looks just as bright, with analysts increasing their full-year EPS estimates for fiscal 2023 by 0.35% in the last week. The Zacks Consensus EPS Estimate now stands at $2.85, reflecting potential growth of 47.04% relative to the current fiscal year. Sales are seen rising 10.13% to $4.42 billion.
Let’s Get Technical
LW shares have advanced over 17% this year. Only stocks that are in extremely powerful uptrends are able to make this type of price move while the market makes a series of lower lows. This is the kind of stock we want to include in our portfolio – one that is trending well and receiving positive earnings estimate revisions.
Image Source: StockCharts
Notice how both the 50-day moving average (blue line) and the 200-day moving average (red line) are sloping up. The stock has been making a series of higher highs through July, and appears to have bottomed back in March – much earlier than the major indices. With both strong fundamentals and technicals, LW is poised to continue its outperformance.
Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. As we know, Lamb Weston has recently witnessed positive revisions. As long as this trend remains intact (and LW continues to deliver earnings beats), the stock will likely continue its bullish run this year. The fact is this elite company is still outperforming.
Bottom Line
Higher prices of the company’s principal products have contributed to LW’s bullish run. Buoyed by a leading industry group and sector combination, it’s not difficult to see why LW is a compelling investment. Robust sales and earnings growth along with a strong technical trend certainly warrant a closer look.
Solid institutional buying should continue to provide a tailwind for the stock price. Recent positive earnings estimate revisions should also serve to create a ‘floor’ in terms of any sudden or unexpected downside moves. If you haven’t already done so, be sure to put LW on your shortlist.
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Bull of the Day: Lamb Weston Holdings, Inc. (LW)
Lamb Weston (LW - Free Report) , a Zacks Rank #1 (Strong Buy), has been a substantial beneficiary of the recovery in the foodservice business. LW has been bucking the market’s downtrend this year on the heels of higher prices for its product offerings. The company is a component of the Zacks Consumer Staples sector, which currently ranks in the top 38% out of all Zacks Ranked Sectors. LW sports a second-best ‘B’ rating in our Zacks Momentum Style Score category, indicating a strong likelihood that the stock’s outperformance will continue.
Lamb Weston is part of the Zacks Food – Miscellaneous industry group, which ranks in the top 27% out of approximately 250 industries. This group is essentially flat on the year, all while the general market has experienced a painful correction. Because it is ranked in the top half of all industry groups, we expect this group to outperform the market over the next 3 to 6 months.
Historical research studies suggest that approximately half of a stock’s price appreciation is due to its industry grouping. In fact, the top 50% of Zacks Ranked Industries outperforms the bottom 50% by a factor of more than 2 to 1. It’s no secret that investing in stocks that are part of leading industry groups can give us a leg up relative to the market. By focusing on leading stocks within the top 50% of Zacks Ranked Industries, we can dramatically improve our stock-picking success.
Company Description
Lamb Weston is a global producer, marketer, and distributor of frozen potato products. The company offers frozen potatoes, commercial ingredients, and appetizers under the Lamb Weston brand, in addition to other licensed brands and various customer labels. LW is also engaged in the vegetable and dairy business. It serves retail and foodservice customers, specialty retailers, convenience stores, and both independent and chain restaurants. Lamb Weston was founded in 1950 and is headquartered in Eagle, ID.
Product volumes continue to benefit from a rebound in demand at full-service restaurants and non-commercial channels, like lodging and hospitality. The company has increased prices on its products to counteract higher input, manufacturing, and transportation costs. LW’s efforts to boost offerings and expand capacity have enabled it to effectively meet rising demand conditions for products such as fries and snacks.
Earnings Trends and Future Estimates
LW has exceeded earnings estimates in three of the past four quarters. Back in April, the company reported fiscal Q3 EPS of $0.73 per share, marking a 65.91% surprise over the $0.44 consensus estimate. LW has delivered a trailing four-quarter average earnings surprise of 18.1%.
Earnings estimates for the upcoming announcement have seen positive changes as of late. The fiscal Q4 consensus estimate has been revised upward by 2% to $0.51 per share in just the past 7 days. If the company is able to achieve this, it would translate to growth of 15.91% relative to the same quarter last year. Sales are expected to climb 6.03% to $1.07 billion.
What the Zacks Model Reveals
The Zacks Earnings ESP (Expected Surprise Prediction) seeks to identify companies that have recently witnessed positive earnings estimate revision activity. The technique has proven to be quite useful for finding positive surprises. In fact, when combining a Zacks Rank #3 or better with a positive Earnings ESP, stocks produced a positive surprise 70% of the time according to our 10-year backtest.
LW boasts a +0.99% Earnings ESP for the fiscal fourth quarter. Another earnings beat may be in the cards when the company reports these results on July 27th.
The future looks just as bright, with analysts increasing their full-year EPS estimates for fiscal 2023 by 0.35% in the last week. The Zacks Consensus EPS Estimate now stands at $2.85, reflecting potential growth of 47.04% relative to the current fiscal year. Sales are seen rising 10.13% to $4.42 billion.
Let’s Get Technical
LW shares have advanced over 17% this year. Only stocks that are in extremely powerful uptrends are able to make this type of price move while the market makes a series of lower lows. This is the kind of stock we want to include in our portfolio – one that is trending well and receiving positive earnings estimate revisions.
Image Source: StockCharts
Notice how both the 50-day moving average (blue line) and the 200-day moving average (red line) are sloping up. The stock has been making a series of higher highs through July, and appears to have bottomed back in March – much earlier than the major indices. With both strong fundamentals and technicals, LW is poised to continue its outperformance.
Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. As we know, Lamb Weston has recently witnessed positive revisions. As long as this trend remains intact (and LW continues to deliver earnings beats), the stock will likely continue its bullish run this year. The fact is this elite company is still outperforming.
Bottom Line
Higher prices of the company’s principal products have contributed to LW’s bullish run. Buoyed by a leading industry group and sector combination, it’s not difficult to see why LW is a compelling investment. Robust sales and earnings growth along with a strong technical trend certainly warrant a closer look.
Solid institutional buying should continue to provide a tailwind for the stock price. Recent positive earnings estimate revisions should also serve to create a ‘floor’ in terms of any sudden or unexpected downside moves. If you haven’t already done so, be sure to put LW on your shortlist.