Lamb Weston (LW) Stock Up on Strategic Pricing & Expansions
Lamb Weston Holdings, Inc. LW is focused on undertaking strategic pricing efforts, which is yielding. The provider of value-added frozen potato products is on track with strategic growth efforts, like boosting offerings and expanding capacity.
The Zacks Rank #1 (Strong Buy) stock has gained 7.6% year-to-date against the industry’s 15.1% decline. The stock has outperformed the Zacks Consumer Staples sector’s 11.5% decline. Let’s discuss the factors driving Lamb Weston’s growth.
Pricing Actions: Key Driver
Lamb Weston is benefiting from robust price/mix, as witnessed during the fiscal first quarter. The price/mix rose 23%, reflecting gains from pricing actions to counter input and manufacturing cost inflation. In the North American and International segments, price/mix grew 24% and 18%, respectively. Strategic pricing actions drove the company’s quarterly net sales, which amounted to $1,665.3 million, rising 48%. Management expects the fiscal 2024 price mix to be up low-double-digits.
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Expansion Efforts Fuel Growth
Lamb Weston’s sturdy balance sheet and capacity to generate cash keep it well-placed to boost production capacity and fuel long-term growth. The company’s efforts to expand offerings and capacity enable it to meet rising demand conditions for snacks and fries effectively. Capital expenditures amounted to nearly $305 million in the fiscal first quarter on construction costs as management is on track with expanding its processing capacity in China, Idaho, Argentina and the Netherlands. For fiscal 2024, the company expects cash to be used for capital expenditures in the $800-$900 million band.
The company’s global manufacturing footprint, with cutting-edge production capabilities, is yielding. Its global supply chain optimization initiatives and disciplined capital allocation strategy have created a more profitable and high-growth business. Management’s focus on innovations creates opportunities to drive growth and widen the total addressable market.
Final Thoughts
Lamb Weston has continued to battle increased selling, general and administrative expenses for a while now. The company has seen volatile restaurant traffic trends thanks to high-interest rates, inflation and uncertainty impacting consumers.
Nevertheless, Lamb Weston continues to reap benefits from an effective pricing scenario and a solid operating momentum. The company’s focus on global expansion efforts continues to drive growth.
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