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3 Factors That Make Lamb Weston (LW) An Attractive Stock

By Zacks Investment ResearchStock MarketsMar 03, 2020 10:18PM ET
www.investing.com/analysis/3-factors-that-make-lamb-weston-lw-an-attractive-stock-200513232
3 Factors That Make Lamb Weston (LW) An Attractive Stock
By Zacks Investment Research   |  Mar 03, 2020 10:18PM ET
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Lamb Weston Holdings Inc. (NYSE:LW) 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 (NYSE:HSY) , 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 (NYSE:PG) which carries a Zacks Rank #2, has a long-term earnings growth rate of 7.4%.

e.l.f. Beauty Inc. (NYSE:ELF) , which carries a Zacks Rank #2, has a long-term earnings growth rate of 3.8%.

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Hershey Company (The) (HSY): Free Stock Analysis Report

Procter & Gamble Company (The) (PG): Free Stock Analysis Report

e.l.f. Beauty Inc. (ELF): Free Stock Analysis Report

Lamb Weston Holdings Inc. (LW): Free Stock Analysis Report

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3 Factors That Make Lamb Weston (LW) An Attractive Stock
 

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3 Factors That Make Lamb Weston (LW) An Attractive Stock

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