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Lamb Weston (LW) Stock Up More Than 35% in 6 Months: Here's Why
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Focus on undertaking pricing efforts is favoring Lamb Weston Holdings, Inc. (LW - Free Report) . The company’s strategic growth efforts, including boosting offerings and expanding capacity, is noteworthy.
The upsides mentioned above were seen in its third-quarter fiscal 2023 results, with the top and the bottom line increasing year over year and beating the Zacks Consensus Estimate. Impressively, management raised its fiscal 2023 guidance.
The Zacks Rank #1 (Strong Buy) stock has gained 39.3% in the past six months compared with the industry’s 7.9% growth. The stock has outperformed the Zacks Consumer Staples sector’s 5.7% growth. Let’s delve deeper.
Image Source: Zacks Investment Research
Solid Q3 Performance & Raised View
In the third quarter of fiscal 2023, Lamb Weston’s bottom line came in at $1.43 per share, up 127% from the year-ago quarter’s reported figure. Net sales amounted to $1,253.6 million, up 31%. Results gained from broad-based growth, with solid sales and earnings performance in every core business segment. Sales in the Global segment increased 33% to $648.5 million. In the Foodservice unit, sales increased 22% to $360 million. In the Retail segment, sales surged 50% to $216 million.
For fiscal 2023, management expects net sales growth in the range of $5.25-$5.35 billion. Earlier, the company had anticipated delivering net sales in the range of $4.8-$4.9 billion. Adjusted EBITDA (including unconsolidated joint ventures) is likely to be in the range of $1,180-$1,210 million compared with $1,050-$1,100 million projected earlier. Adjusted diluted earnings per share (EPS) are envisioned in the range of $4.35-$4.50 for fiscal 2023, up from the previous guidance of $3.75-$4.00.
Pricing Effort on Track
Lamb Weston’s top line has been benefiting from robust price/mix, as witnessed during the third quarter of fiscal 2023. The price/mix increased 31%, reflecting gains from pricing actions across its core business units undertaken to counter input and manufacturing cost inflation.
In the Global segment, price/mix grew 33% on gains from domestic and international pricing actions to counter inflationary pressures. Foodservice segment price/mix benefited from the carryover benefits of pricing actions undertaken in the previous year and moves made in fiscal 2023 to battle inflationary headwinds. In the Retail segment, price/mix increased 44%. The upside can be attributed to the carryover impact of pricing actions in the branded and private-label portfolios and pricing actions carried over in fiscal 2023.
Capacity Expansion Drives Growth
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, 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 of french fry processing capacity at its existing American Falls, ID facility. The company envisions a manufacturing capacity of 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.
In fiscal third quarter, Lamb Weston’s capital expenditures came in at nearly $500 million. This reflects construction costs as the company expands its processing capacity in Idaho, China and Argentina. For fiscal 2023, the company expects cash used for capital expenditures in the band of $700-$725 million. Lamb Weston’s efforts to boost offerings and expand capacity enable the company to effectively meet rising demand conditions for snacks and fries.
In February 2023, Lamb Weston concluded the buyout of remaining equity interests in its European joint venture with Meijer Frozen Foods B.V. The move strengthens the company’s ability to serve customers across key markets globally. The company (in July 2022) 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%. Apart from this, the company is continuing with investments to boost supply chain, commercial and information technology operations.
We believe that such well-chalked expansion efforts and effective pricing actions will likely help LW stay in investors’ good books.
The Chef's Warehouse, which distributes specialty food products, currently sports a Zacks Rank #1 (Strong Buy). Chef's Warehouse has a trailing four-quarter earnings surprise of 33.8%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for CHEF’s current financial year sales and earnings suggests growth of 25.5% and 7.1%, respectively, from the year-ago reported figures.
General Mills, a branded consumer food company, currently carries a Zacks Rank #2 (Buy). GIS has a trailing four-quarter earnings surprise of 8.1%, on average.
The Zacks Consensus Estimate for General Mills’ current fiscal year sales and earnings suggests growth of 6.3% and 7.4%, respectively, from the year-ago reported figures.
Conagra Brands, operating as a consumer-packaged goods food company, currently carries a Zacks Rank #2. CAG has a trailing four-quarter earnings surprise of 13.2%, on average.
The Zacks Consensus Estimate for Conagra Brands’ current fiscal year sales and earnings suggests an improvement of 7.1% and 16.5%, respectively, from the year-ago reported number.
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Lamb Weston (LW) Stock Up More Than 35% in 6 Months: Here's Why
Focus on undertaking pricing efforts is favoring Lamb Weston Holdings, Inc. (LW - Free Report) . The company’s strategic growth efforts, including boosting offerings and expanding capacity, is noteworthy.
The upsides mentioned above were seen in its third-quarter fiscal 2023 results, with the top and the bottom line increasing year over year and beating the Zacks Consensus Estimate. Impressively, management raised its fiscal 2023 guidance.
The Zacks Rank #1 (Strong Buy) stock has gained 39.3% in the past six months compared with the industry’s 7.9% growth. The stock has outperformed the Zacks Consumer Staples sector’s 5.7% growth. Let’s delve deeper.
Image Source: Zacks Investment Research
Solid Q3 Performance & Raised View
In the third quarter of fiscal 2023, Lamb Weston’s bottom line came in at $1.43 per share, up 127% from the year-ago quarter’s reported figure. Net sales amounted to $1,253.6 million, up 31%. Results gained from broad-based growth, with solid sales and earnings performance in every core business segment. Sales in the Global segment increased 33% to $648.5 million. In the Foodservice unit, sales increased 22% to $360 million. In the Retail segment, sales surged 50% to $216 million.
For fiscal 2023, management expects net sales growth in the range of $5.25-$5.35 billion. Earlier, the company had anticipated delivering net sales in the range of $4.8-$4.9 billion. Adjusted EBITDA (including unconsolidated joint ventures) is likely to be in the range of $1,180-$1,210 million compared with $1,050-$1,100 million projected earlier. Adjusted diluted earnings per share (EPS) are envisioned in the range of $4.35-$4.50 for fiscal 2023, up from the previous guidance of $3.75-$4.00.
Pricing Effort on Track
Lamb Weston’s top line has been benefiting from robust price/mix, as witnessed during the third quarter of fiscal 2023. The price/mix increased 31%, reflecting gains from pricing actions across its core business units undertaken to counter input and manufacturing cost inflation.
In the Global segment, price/mix grew 33% on gains from domestic and international pricing actions to counter inflationary pressures. Foodservice segment price/mix benefited from the carryover benefits of pricing actions undertaken in the previous year and moves made in fiscal 2023 to battle inflationary headwinds. In the Retail segment, price/mix increased 44%. The upside can be attributed to the carryover impact of pricing actions in the branded and private-label portfolios and pricing actions carried over in fiscal 2023.
Capacity Expansion Drives Growth
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, 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 of french fry processing capacity at its existing American Falls, ID facility. The company envisions a manufacturing capacity of 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.
In fiscal third quarter, Lamb Weston’s capital expenditures came in at nearly $500 million. This reflects construction costs as the company expands its processing capacity in Idaho, China and Argentina. For fiscal 2023, the company expects cash used for capital expenditures in the band of $700-$725 million. Lamb Weston’s efforts to boost offerings and expand capacity enable the company to effectively meet rising demand conditions for snacks and fries.
In February 2023, Lamb Weston concluded the buyout of remaining equity interests in its European joint venture with Meijer Frozen Foods B.V. The move strengthens the company’s ability to serve customers across key markets globally. The company (in July 2022) 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%. Apart from this, the company is continuing with investments to boost supply chain, commercial and information technology operations.
We believe that such well-chalked expansion efforts and effective pricing actions will likely help LW stay in investors’ good books.
Other Solid Consumer Staple Picks
Some other top-ranked consumer staple stocks are The Chef's Warehouse (CHEF - Free Report) , General Mills (GIS - Free Report) and Conagra Brands (CAG - Free Report) .
The Chef's Warehouse, which distributes specialty food products, currently sports a Zacks Rank #1 (Strong Buy). Chef's Warehouse has a trailing four-quarter earnings surprise of 33.8%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for CHEF’s current financial year sales and earnings suggests growth of 25.5% and 7.1%, respectively, from the year-ago reported figures.
General Mills, a branded consumer food company, currently carries a Zacks Rank #2 (Buy). GIS has a trailing four-quarter earnings surprise of 8.1%, on average.
The Zacks Consensus Estimate for General Mills’ current fiscal year sales and earnings suggests growth of 6.3% and 7.4%, respectively, from the year-ago reported figures.
Conagra Brands, operating as a consumer-packaged goods food company, currently carries a Zacks Rank #2. CAG has a trailing four-quarter earnings surprise of 13.2%, on average.
The Zacks Consensus Estimate for Conagra Brands’ current fiscal year sales and earnings suggests an improvement of 7.1% and 16.5%, respectively, from the year-ago reported number.