Goldman Sachs Recommends Buying Shares of Lamb Weston
Reasons for the Recommendation
LW XLP mountain 2023-06-30 LW vs XLP since June 30 “We see recent underperformance providing an attractive entry point,” Samuelson wrote in a Monday note. He added that the company’s stronger-than-expected fiscal fourth-quarter and 2024 fiscal year outlook suggest “a balance of risks skewed to the upside.”
Causes of Underperformance
“Recent investor conversations have focused on disappointing FY4Q23 organic volumes (-10% y/y) and an expectation for similar volume declines in FY1Q24E (Aug) as a new source for concern amidst broader staples volume pressure,” the analyst added, leading to the stock’s underperformance. Various factors, including destocking among quick-service restaurant customers in Asia and limited raw potato availability have contributed to the decline, said Samuelson.
Margin Enhancement Initiatives
“Against this backdrop, we have done more detailed analysis of LW’s ongoing margin enhancement initiatives, and come away with incremental confidence that ongoing efforts to improve mix,” he said. According to the analyst, these efforts will help reduce the risk of oversupply.
— HaberTusba’s Michael Bloom contributed to this report.
