Lamb Weston Holdings, Inc. (LW Quick QuoteLW - Free Report) appears in great shape. The frozen potato product company has been benefiting from its efficient pricing initiatives and efforts to boost capacity. Encouragingly, management raised its fiscal 2023 guidance when it reported third-quarter results.

This Zacks Rank #2 (Buy) stock has rallied 16.1% in the past three months compared with the industry’s growth of 6.7%. The Zacks Consensus Estimate for the current fiscal-year earnings per share (EPS) has jumped from $3.91 to $4.51 in the past 60 days.

Factors Working Well

Lamb Weston’s top line has been benefiting from a robust price/mix, as witnessed in 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. On its third-quarter earnings call, management highlighted that its ability to counter input cost inflation through pricing actions is likely to remain favorable.

In the Global segment, the price/mix grew 33% in the third quarter on gains from domestic and international pricing actions to counter inflationary pressures. The Foodservice segment’s 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.

Meanwhile, in the Retail segment, the price/mix surged 44%. The upside can be attributed to the carryover impact of pricing actions on the branded and private-label portfolios and pricing actions carried over in fiscal 2023.

Lamb Weston has been focused on boosting production capacity and fueling long-term growth. In the third quarter of fiscal 2023, Lamb Weston’s capital expenditures came in at roughly $500 million. This reflects construction costs as the company expands its processing capacity in Idaho, China and Argentina. For fiscal 2023, LW expects cash used for capital expenditures in the band of $700-$725 million.

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 had announced the expansion plan for french fry processing capacity at its existing American Falls, Idaho facility, with the envisioned capacity to manufacture more than 350 million pounds of frozen french fries and other potato products annually. In March 2021, LW had revealed plans to build a new french fry processing facility in Ulanqab, Inner Mongolia, China.

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 unveiled that it 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.

Further, Lamb Weston (in July 2022) bought an additional 40% stake in Lamb Weston Alimentos Modernos S.A.— which is its joint venture in Argentina — taking its total ownership to 90%. These factors reflect LW’s focus on achieving growth via expansion.

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Future Looks Bright

For fiscal 2023, management expects net sales growth in the range of $5.25-$5.35 billion. Earlier, Lamb Weston had anticipated delivering net sales in the range of $4.8-$4.9 billion. The updated guidance includes $300 to $325 million of sales attributed to the consolidation of LW EMEA’s results in the fiscal fourth quarter.

Adjusted EBITDA (including unconsolidated joint ventures) is likely to come in the range of $1,180-$1,210 million compared with the $1,050-$1,100 million band forecast earlier. Excluding the consolidation of LW EMEA, management expects a gross margin of 28-28.5%, higher than the earlier target of 27-28%. Adjusted diluted EPS is envisioned in the range of $4.35-$4.50, up from the previous guidance in the band of $3.75-$4.00.

All said, Lamb Weston looks well-placed for growth.

Other Appetizing Stocks

Some other top-ranked food stocks are The Kraft Heinz Company (KHC Quick QuoteKHC - Free Report) , McCormick & Company, Incorporated (MKC Quick QuoteMKC - Free Report) and Conagra Brands (CAG Quick QuoteCAG - Free Report) .

The Kraft Heinz Company, a food and beverage product company, currently sports a Zacks Rank #1 (Strong Buy). KHC has a trailing four-quarter earnings surprise of 10.7%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for The Kraft Heinz Company’s current fiscal-year sales and earnings suggests growth of 2.8% and 3.6%, respectively, from the year-ago reported figures.
 
McCormick, which operates as a manufacturer, marketer and distributor of spices, seasonings, specialty foods and flavors, currently carries a Zacks Rank #2. MKC has a trailing four-quarter negative earnings surprise of 3.7%, on average.

The Zacks Consensus Estimate for McCormick’s current fiscal-year sales and earnings suggests growth of 6.4% and 3.6%, respectively, from the year-ago reported numbers.

Conagra Brands, which operates 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 growth of 7.1% and 16.5%, respectively, from the year-ago reported numbers.