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Lamb Weston (LW) Up More Than 20% in a Year: Will It Stay?

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Lamb Weston Holdings, Inc. (LW - Free Report) is on track with strategic pricing efforts to drive growth. The provider of value-added frozen potato products has been undertaking capacity expansions, which is noteworthy. These trends were witnessed in the fourth quarter of fiscal 2023, with the top and the bottom line beating the Zacks Consensus Estimate and increasing year over year.

For fiscal 2024, management expects net sales in the range of $6.7-$6.9 billion, up from $4.81 billion reported in fiscal 2023. Earnings per share (EPS) are envisioned in the range of $4.95-$5.40, suggesting an increase from $4.68 reported in the year-ago period.

The Zacks Rank #3 (Hold) stock has gained 21.1% in the past year against the industry’s 1.9% decline. Let’s delve deeper.

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What’s Working in Lamb Weston’s Favor?

Lamb Weston’s net sales have benefited from robust price/mix, as witnessed during the fourth quarter of fiscal 2023. The price/mix rose 24%, reflecting gains from pricing actions in every core business unit to counter input and manufacturing cost inflation. In the Global, Foodservice and Retail segment, price/mix grew 28%, 13% and 35%, respectively. Efficient pricing is likely to protect margins.

Lamb Weston’s sturdy balance sheet and capacity to generate cash keeps it well-placed to boost production capacity and fuel long-term growth. Capital expenditures totaled $736 million during fiscal 2023, allocated toward construction costs as the company is on track to expand its processing capacity.

In its last earnings call, management highlighted that it broke ground on a 250 million-pound capacity expansion. The expansion will enhance the company’s ability to cater to the growing South American market. Management also stated that it made progress on its expansion projects across China and the Netherlands, which are expected to come online in the next 18 months.

Will Hurdles be Countered?

Escalated costs partly hurt Lamb Weston’s quarterly gross profit in the fiscal fourth quarter. Increased costs per pound and reduced sales volumes were hurdles for the metric. Increased costs per pound reflect high-single-digit cost inflation for critical inputs like raw potatoes, energy, labor, edible oils and ingredients, including grains and starches.

In its last earnings call, management highlighted that the inflationary environment and other macro pressures on consumers continue to hamper traffic in specific restaurant channels. Nevertheless, Lamb Weston is on track with strategies like pricing actions and enhancing business and product mix to counter rising input cost inflation.

Appetizing Food Picks

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The Zacks Consensus Estimate for MGP Ingredients’ current financial-year sales and earnings per share suggests growth of 5.8% and 10.4%, respectively, from the corresponding year-ago reported figures.

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Celsius Holdings (CELH - Free Report) , which offers functional drinks and liquid supplements, currently carries a Zacks Rank #2. CELH delivered an earnings surprise of 100% in the last reported quarter.

The Zacks Consensus Estimate for Celsius Holdings’ current financial-year sales and earnings suggests growth of 88.9% and 170.7%, respectively, from the year-ago reported numbers.


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