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3 Factors That Make Lamb Weston (LW) an Attractive Pick

Zacks Equity Research

Lamb Weston Holdings Inc. LW has been benefiting from robust expansion efforts, which have been boosting investors’ optimism. Notably, shares of this Zacks Rank #2 (Buy) company have surged 36.5% in the last six months compared with the industry’s growth of 4.6%. Also, the stock comfortably outperformed the Zacks Consumer Staples sector’s growth of 0.9% in the same time frame.



Let’s discuss the factors that are likely to keep driving the frozen potato products provider, which has long-term earnings per share growth rate of 8.8%.

Buyouts & Other Expansion Efforts Bode Well

Lamb Weston has been undertaking initiatives to boost offerings and operating capacity. These efforts enable the company to effectively meet rising demand conditions for snacks and fries. In this regard, it completed the acquisition of joint venture interests in Lamb Weston BSW sometime around mid-fiscal 2019, which is contributing to its results. 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.

Among other moves, the company acquired Australia-based companies — Ready Meals and Marvel Packers — in 2019 and 2018, respectively. These buyouts have bolstered Lamb Weston’s market share in Australia. Speaking on capacity expansion initiatives, the company completed the expansion of a facility located at Hermiston, Oregon in June 2019. This is expected to cater to growing demand conditions in North America and key export markets as well as support production needs emerging from innovation and limited time offerings or LTO’s. Notably, management anticipates that volume growth in fiscal 2020 is likely to be driven by the Oregon facility expansion.

LTO’s: Major Sales Driver

Lamb Weston has been benefitting from its LTO innovations, which are key part in the company’s long-term prospects.  Incidentally, LTOs helped drive growth and market share gains in fiscal 2018 and in fiscal 2019. More specifically, LTOs are aiding volume growth in the company’s Global segment. Management remains positive about further prospects from new LTOs.

Robust Global Segment

Global segment accounted for more than half of Lamb Weston’s second-quarter fiscal 2020 sales and is a major driver for the future. Sales in the segment have been rising year over year for a while and improved 15% to $539.6 million in second-quarter fiscal 2020. Going ahead, this segment is likely to remain a tailwind to Lamb Weston’s growth in fiscal 2020.

We believe that the aforementioned upsides are likely to help Lamb Weston maintain its solid footing in the food space.

Looking for More Food stock? Check These

Post Holdings, Inc. POST, which sports a Zacks Rank #1 (Strong Buy), has a long-term earnings growth rate of 7%. You can see the complete list of today’s Zacks #1 Rank stocks here.

General Mills, Inc. GIS, which carries a Zacks Rank #2, has a long-term earnings growth rate of 7%.

Campbell Soup Company CPB, which carries a Zacks Rank #2, has a long-term earnings growth rate of 6%.

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