Lamb Weston (LW) Hits a 52-Week High, Can the Run Continue?
Have you been paying attention to shares of Lamb Weston Holdings LW? Shares have been on the move with the stock up 14.1% over the past month. LW hit a new 52-week high of $66.75 in the previous session. Lamb Weston has gained 17.6% since the start of the year compared to the -9.4% move for the Consumer Staples sector and the -11.3% year-to-date return for its peer group.
What's Driving the Outperformance?
The stock has an impressive record of positive earnings surprises, having beaten the Zacks Consensus Estimate in each of the last four quarters. In its last earnings report on April 5, 2018, Lamb Weston reported EPS of $0.91 versus the Zacks Consensus Estimate of $0.8 while it beat the consensus revenue estimate by 5.84%.
For the current fiscal year, Lamb Weston Holdings is expected to post earnings of $2.6 per share on $3.38 billion in revenues. This represents a 12.07% change in EPS on a 6.56% change in revenues. For the next fiscal year, the company is expected to earn $3.03 per share on $3.57 billion in revenues. This represents a year-over-year change of 16.54% and 5.62%, respectively.
Valuation Metrics
Lamb Weston Holdings may be at a 52-week high right now, but what might the future hold for LW? A key aspect of this question is taking a look at valuation metrics in order to determine if the company is due for a pullback from this level.
On this front, we can look at the Zacks Style Scores, as they provide investors with an additional way to sort through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.
Lamb Weston Holdings has a Value Score of C. The stock's Growth and Momentum Scores are B and B, respectively, giving the company a VGM Score of B.
In terms of its value breakdown, the stock currently trades at 25.5X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 21.5X versus its peer group's average of 12.6X. Additionally, the stock has a PEG ratio of 2.12. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
Lamb Weston Holdings Inc. Price and Consensus
Lamb Weston Holdings Inc. Price and Consensus | Lamb Weston Holdings Inc. Quote
Zacks Rank
We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, Lamb Weston Holdings currently has a Zacks Rank of #2 (Buy) thanks to rising earnings estimates.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 and Style Scores of A or B, it looks as if Lamb Weston Holdings meets the list of requirements. Thus, it seems as though LW shares could have a bit more room to run in the near term.
How Does Lamb Weston Stack Up to the Competition?
Shares of Lamb Weston have been moving higher, and the company still appears to be a decent choice, but what about the rest of the industry? Some of its industry peers are also solid potential picks, including United Natural Foods UNFI, Campbell Soup Company CPB, and Nestle SA NSRGY, all of which currently have a Zacks Rank of at least #2 and a VGM Score of at least B, making them well-rounded choices.
However, it is worth noting that the Zacks Industry Rank for this group is in the bottom half of the ranking, so it isn't all good news for Lamb Weston. Still, the fundamentals for LW are promising, and it still has potential despite being at a 52-week high.
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