LW - Lamb Weston: Sequential Sales Recovery Should Drive Stock Higher

2024-07-21 18:58:21 ET

Summary

• Lamb Weston Holdings, Inc. has good growth prospects in the medium to long term, with revenue expected to benefit from the non-recurrence of one-time ERP headwinds and capacity expansion.
• The company's margin outlook is positive, with benefits expected from cost synergies and favorable potato prices.
• Despite concerns about lower demand and customer losses, Lamb Weston offers a good long-term investment opportunity with attractive valuations and positive growth prospects.

Investment Thesis

Lamb Weston Holdings, Inc. ( LW ) has good medium- to long-term growth prospects. The company’s revenue should benefit from the non-recurrence of one-time ERP headwinds that the company faced in Q3 FY24. Further, as the company wins back its customers lost due to these headwinds over the coming quarters, the volume should sequentially improve. This, coupled with easier comps should help the company return to Y/Y growth in the 2HFY25. Moreover, capacity expansion, improving revenue mix, and resilient demand for the fries category should support the company’s sales in the long term. So, while the company has faced headwinds in the last quarter, I am optimistic about its growth prospects moving forward....

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