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3 Factors That Make Lamb Weston (LW) an Attractive Stock
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Lamb Weston Holdings Inc. (LW - Free Report) is benefiting from robust growth initiatives which have been boosting investors’ optimism for quite some time. Notably, shares of this leading frozen potato products provider have gained 18.8% in the past six months against the industry’s decline of 3.3%. Also, the stock compared favourably with the Zacks Consumer Staples sector’s drop of 5.2% in the same time frame.
Let’s discuss the factors that are likely to keep driving the company’s performance.
Strength in Global Segment
Global segment contributed more than half of Lamb Weston’s second-quarter fiscal 2020 sales and is a major driver for the future. Sales in the segment increased 15% to $539.6 million. Volumes increased 14% on strong sales and gains from acquisitions as well as extra shipping days owing to Thanksgiving holiday. Price/mix inched up 1% on pricing adjustments in multi-year contracts. This segment is likely to remain a tailwind to Lamb Weston’s growth in fiscal 2020.
Focus on Capacity Expansion
The company has been undertaking initiatives to boost offerings and operating capacity. These efforts enable Lamb Weston to effectively meet rising demand conditions for snacks and fries. Recently, the company announced a joint venture with Sociedad Comercial del Plata in Argentina. Lamb Weston expects to capture greater revenue prospects in Argentina through this deal. Moreover, it will enable the company to cater to the growing needs of high-quality potato fries in the broader South American market. Apart from this, the company’s acquisition of joint venture interests in Lamb Weston BSW around mid-fiscal 2019 is yielding. Also, the takeovers of Ready Meals and Marvel Packers (in 2019 and 2018, respectively) have bolstered Lamb Weston’s market share in Australia.
Speaking about capacity-expansion endeavors, the company completed the expansion of a facility located at Hermiston, Oregon on Jun 18, 2019. The expansion has facilitated the addition of a new processing line for increasing the production of frozen french fries. This is expected to cater to demand conditions in North America and key export markets as well as support higher production needs.
LTO’s: Key Revenue Driver
Lamb Weston has been benefitting from its limited time offers or LTO innovations, which are a key part of the company’s long-term prospects. Incidentally, LTOs boosted growth and market share gains in fiscal 2018 and fiscal 2019. More specifically, LTOs are aiding volume growth in the company’s Global segment. Management is positive about further prospects from new LTOs.
We believe that the aforementioned upsides are likely to help this Zacks Rank #2 (Buy) stock maintain its solid footing in the food space.
Procter & Gamble (PG - Free Report) which carries a Zacks Rank #2, has a long-term earnings growth rate of 7.4%.
e.l.f. Beauty Inc. (ELF - Free Report) , which carries a Zacks Rank #2, has a long-term earnings growth rate of 3.8%.
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3 Factors That Make Lamb Weston (LW) an Attractive Stock
Lamb Weston Holdings Inc. (LW - Free Report) is benefiting from robust growth initiatives which have been boosting investors’ optimism for quite some time. Notably, shares of this leading frozen potato products provider have gained 18.8% in the past six months against the industry’s decline of 3.3%. Also, the stock compared favourably with the Zacks Consumer Staples sector’s drop of 5.2% in the same time frame.
Let’s discuss the factors that are likely to keep driving the company’s performance.
Strength in Global Segment
Global segment contributed more than half of Lamb Weston’s second-quarter fiscal 2020 sales and is a major driver for the future. Sales in the segment increased 15% to $539.6 million. Volumes increased 14% on strong sales and gains from acquisitions as well as extra shipping days owing to Thanksgiving holiday. Price/mix inched up 1% on pricing adjustments in multi-year contracts. This segment is likely to remain a tailwind to Lamb Weston’s growth in fiscal 2020.
Focus on Capacity Expansion
The company has been undertaking initiatives to boost offerings and operating capacity. These efforts enable Lamb Weston to effectively meet rising demand conditions for snacks and fries. Recently, the company announced a joint venture with Sociedad Comercial del Plata in Argentina. Lamb Weston expects to capture greater revenue prospects in Argentina through this deal. Moreover, it will enable the company to cater to the growing needs of high-quality potato fries in the broader South American market. Apart from this, the company’s acquisition of joint venture interests in Lamb Weston BSW around mid-fiscal 2019 is yielding. Also, the takeovers of Ready Meals and Marvel Packers (in 2019 and 2018, respectively) have bolstered Lamb Weston’s market share in Australia.
Speaking about capacity-expansion endeavors, the company completed the expansion of a facility located at Hermiston, Oregon on Jun 18, 2019. The expansion has facilitated the addition of a new processing line for increasing the production of frozen french fries. This is expected to cater to demand conditions in North America and key export markets as well as support higher production needs.
LTO’s: Key Revenue Driver
Lamb Weston has been benefitting from its limited time offers or LTO innovations, which are a key part of the company’s long-term prospects. Incidentally, LTOs boosted growth and market share gains in fiscal 2018 and fiscal 2019. More specifically, LTOs are aiding volume growth in the company’s Global segment. Management is positive about further prospects from new LTOs.
We believe that the aforementioned upsides are likely to help this Zacks Rank #2 (Buy) stock maintain its solid footing in the food space.
Other Stocks to Consider
Hershey Company (HSY - Free Report) , with a Zacks Rank #2 (Buy), has long-term earnings per share growth rate of 7.7%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Procter & Gamble (PG - Free Report) which carries a Zacks Rank #2, has a long-term earnings growth rate of 7.4%.
e.l.f. Beauty Inc. (ELF - Free Report) , which carries a Zacks Rank #2, has a long-term earnings growth rate of 3.8%.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2019, while the S&P 500 gained and impressive +53.6%, five of our strategies returned +65.8%, +97.1%, +118.0%, +175.7% and even +186.7%.
This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.
See their latest picks free >>