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Lamb Weston (LW) Looks Appetizing on Solid Pricing & Expansion
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Focus on undertaking pricing efforts is favoring Lamb Weston Holdings, Inc. (LW - Free Report) . The company’s strategic growth efforts, including boosting offerings and expanding capacity, are noteworthy.
These upsides were seen in its first-quarter fiscal 2024 results, with the top and the bottom line increasing year over year and beating the Zacks Consensus Estimate. A solid start to the year and the ongoing demand and pricing scenario prompted management to offer an impressive fiscal 2024 outlook.
Let’s delve deeper.
Image Source: Zacks Investment Research
Pricing Actions Drive Growth
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 segment, 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.
Expansion Efforts on Track
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.
In February 2023, Lamb Weston unveiled that it has concluded the buyout of remaining equity interests in its European joint venture with Meijer Frozen Foods B.V. The move strengthens the company’s ability to serve customers across key markets globally.
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.
Road Ahead Looks Promising
The Zacks Rank #1 (Strong Buy) company continues to reap benefits from effective pricing and solid operating momentum. The company’s focus on improving supply chain productivity and global expansion efforts have been a primary growth driver.
For fiscal 2024, management expects net sales in the range of $6.8-$7.0 billion compared with $5.35 million reported earlier. Net sales, excluding buyouts, are likely to grow 6.5-8.5%, mainly driven by pricing actions. Diluted earnings per share (EPS) are envisioned in the range of $5.47-$5.92, up from $4.68 per share reported in fiscal 2023.
Wrapping Up
Lamb Weston has been witnessing higher SG&A expenses, reflecting higher investments to upgrade information systems and enterprise resource planning infrastructure, among other reasons. Volatile restaurant traffic trends due to high interest rates, inflation and uncertainty impacting consumers have been hurting volumes.
Whether the upsides can help Lamb Weston stay afloat amid hurdles is yet to be seen.
The company’s shares have gained 3.6% in a year compared with the industry’s 12.1% decline.
The Zacks Consensus Estimate for Post Holdings’ current fiscal year sales and earnings suggests growth of 13.2% and 189.3%, respectively, from the corresponding year-ago reported figures.
The Kraft Heinz Company (KHC - Free Report) , a food and beverage product company, currently carries a Zacks Rank #2 (Buy). KHC has a trailing four-quarter earnings surprise of 11.3% on average.
The Zacks Consensus Estimate for Kraft Heinz’s current fiscal year sales suggests growth of 2.2% from the corresponding year-ago reported figure.
The J. M. Smucker Company (SJM - Free Report) , which manufactures and markets branded food and beverage products, currently carries a Zacks Rank of 2. SJM has a trailing four-quarter earnings surprise of 7.3%, on average.
The Zacks Consensus Estimate for The J. M. Smucker’s current financial year earnings suggests growth of 8.9% from the year-ago reported figure.
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Lamb Weston (LW) Looks Appetizing on Solid Pricing & Expansion
Focus on undertaking pricing efforts is favoring Lamb Weston Holdings, Inc. (LW - Free Report) . The company’s strategic growth efforts, including boosting offerings and expanding capacity, are noteworthy.
These upsides were seen in its first-quarter fiscal 2024 results, with the top and the bottom line increasing year over year and beating the Zacks Consensus Estimate. A solid start to the year and the ongoing demand and pricing scenario prompted management to offer an impressive fiscal 2024 outlook.
Let’s delve deeper.
Image Source: Zacks Investment Research
Pricing Actions Drive Growth
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 segment, 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.
Expansion Efforts on Track
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.
In February 2023, Lamb Weston unveiled that it has concluded the buyout of remaining equity interests in its European joint venture with Meijer Frozen Foods B.V. The move strengthens the company’s ability to serve customers across key markets globally.
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.
Road Ahead Looks Promising
The Zacks Rank #1 (Strong Buy) company continues to reap benefits from effective pricing and solid operating momentum. The company’s focus on improving supply chain productivity and global expansion efforts have been a primary growth driver.
For fiscal 2024, management expects net sales in the range of $6.8-$7.0 billion compared with $5.35 million reported earlier. Net sales, excluding buyouts, are likely to grow 6.5-8.5%, mainly driven by pricing actions. Diluted earnings per share (EPS) are envisioned in the range of $5.47-$5.92, up from $4.68 per share reported in fiscal 2023.
Wrapping Up
Lamb Weston has been witnessing higher SG&A expenses, reflecting higher investments to upgrade information systems and enterprise resource planning infrastructure, among other reasons. Volatile restaurant traffic trends due to high interest rates, inflation and uncertainty impacting consumers have been hurting volumes.
Whether the upsides can help Lamb Weston stay afloat amid hurdles is yet to be seen.
The company’s shares have gained 3.6% in a year compared with the industry’s 12.1% decline.
Other Solid Picks
Post Holdings (POST - Free Report) , a consumer-packaged goods holding company, currently sports a Zacks Rank #1. POST has a trailing four-quarter earnings surprise of 59.6% on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Post Holdings’ current fiscal year sales and earnings suggests growth of 13.2% and 189.3%, respectively, from the corresponding year-ago reported figures.
The Kraft Heinz Company (KHC - Free Report) , a food and beverage product company, currently carries a Zacks Rank #2 (Buy). KHC has a trailing four-quarter earnings surprise of 11.3% on average.
The Zacks Consensus Estimate for Kraft Heinz’s current fiscal year sales suggests growth of 2.2% from the corresponding year-ago reported figure.
The J. M. Smucker Company (SJM - Free Report) , which manufactures and markets branded food and beverage products, currently carries a Zacks Rank of 2. SJM has a trailing four-quarter earnings surprise of 7.3%, on average.
The Zacks Consensus Estimate for The J. M. Smucker’s current financial year earnings suggests growth of 8.9% from the year-ago reported figure.