Bear of the Day: Lamb Weston (LW)

Lamb Weston LW, a current Zacks Rank #5 (Strong Sell). is a leading global manufacturer, marketer, and distributor of value-added frozen potato products.

Analysts have taken a bearish stance on the company’s earnings outlook, landing it into a Zacks Rank #5 (Strong Sell). Below is a chart illustrating the EPS revisions trend for its current fiscal year. 

Image Source: Zacks Investment Research

Let’s take a closer look at how the company stacks up.

LW Shares Struggle

The company’s latest set of quarterly results caused shares to plunge despite exceeding our consensus expectations, with shares down 31% over the last three months.

Image Source: Zacks Investment Research

Sales of $1.6 billion were up just 1% YoY, whereas adjusted EPS of $0.69 fell 5% year-over-year. As shown below, the top line has shown little growth over the past years, helping explain the consistently poor price action.

Image Source: Zacks Investment Research

Still, it’s important to note that the company did gain some market share in its priority markets, with the company also announcing a 3% increase in its quarterly payout. Shares now yield 3.4% annually after the years of poor price action, the highest yield we’ve seen in 15 years.

Bottom Line

Analysts' negative earnings estimate revisions paired with weak sales growth paints a challenging picture for the company’s shares in the near term.

Lamb Weston LW is a Zacks Rank #5 (Strong Sell), indicating that analysts have taken a bearish stance on the company’s earnings outlook.

For those seeking strong stocks, a great idea would be to focus on stocks carrying a Zacks Rank #1 (Strong Buy) or a Zacks Rank #2 (Buy). These stocks sport a notably stronger earnings outlook and the potential to deliver explosive gains in the near term.

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This article originally published on Zacks Investment Research (zacks.com).

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