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Lamb Weston (LW) Stock Up More Than 20% in 6 Months: Here's Why
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Lamb Weston Holdings, Inc. (LW - Free Report) is gaining from strength in its strategic growth efforts, like boosting offerings and expanding capacity. The provider of value-added frozen potato products is benefiting from effective pricing efforts.
The upsides mentioned above were seen in its second-quarter fiscal 2023 results, with the top and the bottom line increasing year over year and beating the Zacks Consensus Estimate. Considering robust first-half results and business momentum, management raised its guidance range for fiscal 2023.
The Zacks Rank #2 (Buy) stock has gained 24.9% in the past six months compared with the industry’s 1.2% growth. The stock has comfortably outperformed the Zacks Consumer Staples sector’s 1.5% growth. Let’s delve deeper.
Image Source: Zacks Investment Research
Solid Q2 Performance & Raised View
Lamb Weston saw solid sales and earnings growth across all core segments in the second quarter of fiscal 2023. LW’s bottom line came in at $1.28 per share, surging 172% from the year-ago quarter’s reported figure. Net sales amounted to $1,276.5 million, up 27%. The upside is driven by a favorable price/mix. Sales in the Global segment increased 34% to $692.8 million. Foodservice sales increased 14% to $357.9 million. In the Retail segment, sales went up 34% to $191.5 million.
Along with its quarterly results, management raised its guidance range for fiscal 2023. Lamb Weston expects net sales growth in the range of $4.8-$4.9 billion for fiscal 2023. The company had anticipated delivering net sales at the higher end of a $4.7-$4.8 billion range. Net sales growth is likely to be driven by gains from pricing actions. Adjusted EBITDA (including unconsolidated joint ventures) is likely to come in the range of $1,050-$1,100 million compared with $840-$910 million forecast earlier. Adjusted diluted earnings per share (EPS) are now envisioned in the range of $3.75-$4.00, up from the previous guidance of $2.45-$2.85.
Pricing Actions Fuel Growth
Lamb Weston’s top line has been benefiting from robust price/mix, as witnessed during the second quarter of fiscal 2023. The price/mix increased 30%, reflecting gains from product and freight pricing actions in all core business units to counter input, manufacturing and transportation cost inflation.
In the Global segment. price/mix rose 31% on the back of domestic and international product and freight pricing actions, along with a positive mix. In the Foodservice business, price/mix rose 25%, reflecting carryover gains of product and freight pricing actions to mitigate inflation and pricing efforts undertaken during fiscal 2023. For the Retail segment, price/mix advanced 43% on the carryover impact of pricing actions in the branded and private label portfolios and pricing actions carried over in fiscal 2023. In its fiscal second-quarter earnings call, management highlighted that it expects to drive strong price growth across the foodservice and retail units for the back half of the year.
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. In September 2022, LW 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 of its 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.
Apart from the capacity-expansion endeavors mentioned above, the company recently concluded the buyout of remaining equity interests in its European joint venture with Meijer Frozen Foods B.V. The move will solidify LW’s manufacturing footprint to better serve its customers and tap into growth opportunities. In July 2022, Lamb Weston bought an additional 40% stake in Lamb Weston Alimentos Modernos S.A. ("LWAMSA") — which is its joint venture in Argentina — taking its total ownership to 90%.
We believe that such well-chalked expansion efforts and effective pricing actions will likely help LW stay in investors’ good books.
Post Holdings, which is a consumer-packaged goods company, sports a Zacks Rank #1 (Strong Buy) at present. Post Holdings has a trailing four-quarter earnings surprise of 34.8%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for POST’s current financial-year sales and earnings suggests growth of 1.6% and 111.3%, respectively, from the year-ago reported numbers.
General Mills, a branded consumer foods company, currently carries a Zacks Rank #2. GIS has a trailing four-quarter earnings surprise of 8.7%, on average.
The Zacks Consensus Estimate for General Mills’ current fiscal-year sales and earnings suggests growth of 5.2% and 6.1%, respectively, from the corresponding year-ago reported figures.
Hershey, the leader in chocolate and non-chocolate confectionery, currently carries a Zacks Rank #2. HSY has a trailing four-quarter earnings surprise of 11.3%, on average
The Zacks Consensus Estimate for Hershey’s current financial-year sales and earnings suggests growth of 7.8% and 10.2%, respectively, from the year-ago reported numbers.
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Lamb Weston (LW) Stock Up More Than 20% in 6 Months: Here's Why
Lamb Weston Holdings, Inc. (LW - Free Report) is gaining from strength in its strategic growth efforts, like boosting offerings and expanding capacity. The provider of value-added frozen potato products is benefiting from effective pricing efforts.
The upsides mentioned above were seen in its second-quarter fiscal 2023 results, with the top and the bottom line increasing year over year and beating the Zacks Consensus Estimate. Considering robust first-half results and business momentum, management raised its guidance range for fiscal 2023.
The Zacks Rank #2 (Buy) stock has gained 24.9% in the past six months compared with the industry’s 1.2% growth. The stock has comfortably outperformed the Zacks Consumer Staples sector’s 1.5% growth. Let’s delve deeper.
Image Source: Zacks Investment Research
Solid Q2 Performance & Raised View
Lamb Weston saw solid sales and earnings growth across all core segments in the second quarter of fiscal 2023. LW’s bottom line came in at $1.28 per share, surging 172% from the year-ago quarter’s reported figure. Net sales amounted to $1,276.5 million, up 27%. The upside is driven by a favorable price/mix. Sales in the Global segment increased 34% to $692.8 million. Foodservice sales increased 14% to $357.9 million. In the Retail segment, sales went up 34% to $191.5 million.
Along with its quarterly results, management raised its guidance range for fiscal 2023. Lamb Weston expects net sales growth in the range of $4.8-$4.9 billion for fiscal 2023. The company had anticipated delivering net sales at the higher end of a $4.7-$4.8 billion range. Net sales growth is likely to be driven by gains from pricing actions. Adjusted EBITDA (including unconsolidated joint ventures) is likely to come in the range of $1,050-$1,100 million compared with $840-$910 million forecast earlier. Adjusted diluted earnings per share (EPS) are now envisioned in the range of $3.75-$4.00, up from the previous guidance of $2.45-$2.85.
Pricing Actions Fuel Growth
Lamb Weston’s top line has been benefiting from robust price/mix, as witnessed during the second quarter of fiscal 2023. The price/mix increased 30%, reflecting gains from product and freight pricing actions in all core business units to counter input, manufacturing and transportation cost inflation.
In the Global segment. price/mix rose 31% on the back of domestic and international product and freight pricing actions, along with a positive mix. In the Foodservice business, price/mix rose 25%, reflecting carryover gains of product and freight pricing actions to mitigate inflation and pricing efforts undertaken during fiscal 2023. For the Retail segment, price/mix advanced 43% on the carryover impact of pricing actions in the branded and private label portfolios and pricing actions carried over in fiscal 2023. In its fiscal second-quarter earnings call, management highlighted that it expects to drive strong price growth across the foodservice and retail units for the back half of the year.
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. In September 2022, LW 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 of its 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.
Apart from the capacity-expansion endeavors mentioned above, the company recently concluded the buyout of remaining equity interests in its European joint venture with Meijer Frozen Foods B.V. The move will solidify LW’s manufacturing footprint to better serve its customers and tap into growth opportunities. In July 2022, Lamb Weston bought an additional 40% stake in Lamb Weston Alimentos Modernos S.A. ("LWAMSA") — which is its joint venture in Argentina — taking its total ownership to 90%.
We believe that such well-chalked expansion efforts and effective pricing actions will likely help LW stay in investors’ good books.
Other Top-Ranked Food Bets
Some other top-ranked stocks are Post Holding (POST - Free Report) , General Mills (GIS - Free Report) and The Hershey Company (HSY - Free Report) .
Post Holdings, which is a consumer-packaged goods company, sports a Zacks Rank #1 (Strong Buy) at present. Post Holdings has a trailing four-quarter earnings surprise of 34.8%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for POST’s current financial-year sales and earnings suggests growth of 1.6% and 111.3%, respectively, from the year-ago reported numbers.
General Mills, a branded consumer foods company, currently carries a Zacks Rank #2. GIS has a trailing four-quarter earnings surprise of 8.7%, on average.
The Zacks Consensus Estimate for General Mills’ current fiscal-year sales and earnings suggests growth of 5.2% and 6.1%, respectively, from the corresponding year-ago reported figures.
Hershey, the leader in chocolate and non-chocolate confectionery, currently carries a Zacks Rank #2. HSY has a trailing four-quarter earnings surprise of 11.3%, on average
The Zacks Consensus Estimate for Hershey’s current financial-year sales and earnings suggests growth of 7.8% and 10.2%, respectively, from the year-ago reported numbers.