Here's Why Lamb Weston (LW) Stock Is Worth Giving A Shot Now

Lamb Weston Holdings, Inc. (NYSE:LW) is worth giving a shot now, as the company’s solid price/mix, impressive global segment and strong limited time offers (LTOs) are likely to fuel growth. These factors have helped this frozen potato products provider put up a robust past record and should aid further momentum at Lamb Weston, which belongs to the Food – Miscellaneous industry. In the past year, Lamb Weston shares have gained 30.4%.

On that note, let’s delve deeper into the past record of this Zacks Rank #2 (Buy) company. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Lamb Weston’s Growth Story to Continue?

Lamb Weston delivered robust second-quarter fiscal 2019 results, wherein both top and bottom lines grew year over year and beat the Zacks Consensus Estimate for the ninth straight time. Markedly, the company has been delivering positive earnings and sales surprise ever since its spin-off from Conagra Brands (NYSE:CAG) in November 2016. Solid results reflect the success of Lamb Weston’s capital expansions, strength of its commercial and supply-chain networks, and focus on innovations.

Further, the company has been largely benefitting from its LTO innovations, which form key part in the company’s long-term prospects. Incidentally, LTOs helped drive growth and market share gains in fiscal 2018. Also, in the second quarter of fiscal 2019, LTOs accounted for significant volume growth in the Global segment, in particular. Management is positive about further prospects from new LTOs, as it expects the company’s new French Fries line to provide more flexibility to enter into tie-ups with customers and boost traffic.

Talking of the Global segment, it accounted for nearly half of Lamb Weston’s second-quarter sales and is a major driver for the future. Sales at this segment jumped 13% to $470 million, thanks to better price/mix and higher volumes. Volumes increased due to strong sales to consumers in the United States and core international regions, and gains from LTOs. Price/mix was fueled by ongoing impacts of pricing actions undertaken last year, and favorable mix.

In fact, the company’s overall price/mix rose 6%, backed by gains from various new pricing structures related to recently renewed deals in the Global unit, continued impacts of pricing and mix enhancement initiatives undertaken in the Retail and Foodservice units. Strong price/mix in the first half of fiscal 2019 is likely to augment sales growth for the year.

Further, while reporting second-quarter results, the company stated that it expects the operating environment to remain favorable for the remainder of fiscal 2019. Though management anticipates to face hurdles like cost inflation and poor potato crop in Europe, these challenges are likely to be countered by solid pricing and cost-saving initiatives along with opportunities in North America. In fact, many other food companies like General Mills (NYSE:GIS) and TreeHouse Foods (NYSE:THS) , among others, are battling cost-related hurdles.

Coming back to Lamb Weston, the company raised its outlook, given a robust first-half show and operating momentum. In fiscal 2019, management expects net sales to increase mid-to-high-single digits compared with the previous view of mid-single-digit increase. Adjusted EBITDA (including unconsolidated joint ventures) is now expected to range between $870 million and $880 million compared with the previous estimate of $860-$870 million.

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