We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Lamb Weston Gains on Robust Sales Trend, Cost Woes Linger
Read MoreHide Full Article
Lamb Weston Holdings Inc. (LW - Free Report) is witnessing a robust top-line trend. The top line has been benefiting from the company’s efficient price/mix, strong Global segment, focus on limited time offerings (or LTOs) and expansion efforts. Such upsides have been driving this Zacks Rank #3 (Hold) stock amid cost-related hurdles as well as challenges in Europe.
Markedly, Lamb Weston’s shares have surged 37.8% in the past six months, outpacing the industry’s growth of 5.8%. Let’s delve deeper.
Factors Driving Lamb Weston’s Performance
Lamb Weston’s sales have been rising year over year for a while. Also, sales surpassed the Zacks Consensus Estimate for the 12th straight time, when it reported first-quarter fiscal 2020 results. Moreover, the bottom line increased 8% year over year. Sturdy performance in the quarter reflects continued gains from price/mix, expansion efforts, and strength in commercial and supply-chain networks along with brand development.
Notably, price/mix rose 2% each at the Global and Foodservice units, while the metric grew 3% in the retail segment. The rise in price/mix across these segments was supported by improved mix and pricing actions. In fact, improved price/mix and volumes drove the gross profit during the first quarter. The Global segment accounted for more than half of Lamb Weston’s first-quarter fiscal 2020 sales and remains a major driver for the future. Sales at this segment increased 11% to $517.6 million, with volumes and price/mix rising 9% and 2%, respectively. Continuity of such trends is likely to augment sales further.
Lamb Weston has been also benefiting from LTO innovation, which plays a key role in the company’s long-term prospects. Incidentally, LTOs helped drive growth and market share in fiscal 2018 and 2019. Apart from this, Lamb Weston is expected to continue reaping benefits from its acquisitions, joint ventures and capacity expansion efforts.
Hurdles Likely to be Countered
Lamb Weston is witnessing cost increases for input materials as well as manufacturing. A rise in manufacturing costs was caused by inefficiencies and depreciation associated with the company’s french fry production line in Oregon, during the first quarter. Such high costs exerted pressure on the gross margin. Rising costs were also a drag on product contribution margins in the Global, Retail and Foodservice units. Well, the company expects increased input and manufacturing costs to continue in fiscal 2020. Additionally, the company is witnessing rising SG&A costs and challenges in Europe.
Incidentally, a poor potato crop scenario in Europe has been affecting Lamb Weston’s performance for a while. In fact, adversities related to the poor potato crop yield witnessed last year have led to higher raw potato costs. This put pressure on the company’s earnings from unconsolidated joint ventures — Lamb Weston/Meijer in Europe and Lamb Weston/RDO in Minnesota — in the first quarter. Potato harvest in Europe will likely be under pressure due to adverse weather conditions. Moreover, costs of potatoes are expected to decline only from the second half of the fiscal year.
While these factors raise concerns, we expect Lamb Weston’s growth efforts to help counter these headwinds and remain in investors’ good books.
Beyond Meat (BYND - Free Report) , with a Zacks Rank #2 (Buy), has an impressive earnings surprise record.
Newell Brands (NWL - Free Report) , also with a Zacks Rank #2, has a long-term earnings per share growth rate of 6%.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
Image: Bigstock
Lamb Weston Gains on Robust Sales Trend, Cost Woes Linger
Lamb Weston Holdings Inc. (LW - Free Report) is witnessing a robust top-line trend. The top line has been benefiting from the company’s efficient price/mix, strong Global segment, focus on limited time offerings (or LTOs) and expansion efforts. Such upsides have been driving this Zacks Rank #3 (Hold) stock amid cost-related hurdles as well as challenges in Europe.
Markedly, Lamb Weston’s shares have surged 37.8% in the past six months, outpacing the industry’s growth of 5.8%. Let’s delve deeper.
Factors Driving Lamb Weston’s Performance
Lamb Weston’s sales have been rising year over year for a while. Also, sales surpassed the Zacks Consensus Estimate for the 12th straight time, when it reported first-quarter fiscal 2020 results. Moreover, the bottom line increased 8% year over year. Sturdy performance in the quarter reflects continued gains from price/mix, expansion efforts, and strength in commercial and supply-chain networks along with brand development.
Notably, price/mix rose 2% each at the Global and Foodservice units, while the metric grew 3% in the retail segment. The rise in price/mix across these segments was supported by improved mix and pricing actions. In fact, improved price/mix and volumes drove the gross profit during the first quarter. The Global segment accounted for more than half of Lamb Weston’s first-quarter fiscal 2020 sales and remains a major driver for the future. Sales at this segment increased 11% to $517.6 million, with volumes and price/mix rising 9% and 2%, respectively. Continuity of such trends is likely to augment sales further.
Lamb Weston has been also benefiting from LTO innovation, which plays a key role in the company’s long-term prospects. Incidentally, LTOs helped drive growth and market share in fiscal 2018 and 2019. Apart from this, Lamb Weston is expected to continue reaping benefits from its acquisitions, joint ventures and capacity expansion efforts.
Hurdles Likely to be Countered
Lamb Weston is witnessing cost increases for input materials as well as manufacturing. A rise in manufacturing costs was caused by inefficiencies and depreciation associated with the company’s french fry production line in Oregon, during the first quarter. Such high costs exerted pressure on the gross margin. Rising costs were also a drag on product contribution margins in the Global, Retail and Foodservice units. Well, the company expects increased input and manufacturing costs to continue in fiscal 2020. Additionally, the company is witnessing rising SG&A costs and challenges in Europe.
Incidentally, a poor potato crop scenario in Europe has been affecting Lamb Weston’s performance for a while. In fact, adversities related to the poor potato crop yield witnessed last year have led to higher raw potato costs. This put pressure on the company’s earnings from unconsolidated joint ventures — Lamb Weston/Meijer in Europe and Lamb Weston/RDO in Minnesota — in the first quarter. Potato harvest in Europe will likely be under pressure due to adverse weather conditions. Moreover, costs of potatoes are expected to decline only from the second half of the fiscal year.
While these factors raise concerns, we expect Lamb Weston’s growth efforts to help counter these headwinds and remain in investors’ good books.
Don’t Miss These Solid Consumer Staple Stocks
Boston Beer (SAM - Free Report) , with a Zacks Rank #1 (Strong Buy), has a long-term earnings per share growth rate of 10%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Beyond Meat (BYND - Free Report) , with a Zacks Rank #2 (Buy), has an impressive earnings surprise record.
Newell Brands (NWL - Free Report) , also with a Zacks Rank #2, has a long-term earnings per share growth rate of 6%.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot trades we're targeting>>