Potato maker Lamb Weston is harvesting solid gains in the current market turbulence, breaking out of a flat base with a buy point of 83.39. Shares are now in the buy zone.
LW stock entered a new base in August but fell below its 50-day moving average in September. It surged over 4% on strong volume earlier this month after a bullish earnings report, lifting above the 50-day line.
Lamb Weston has a near-ideal 97 Composite Rating and an equally-impressive 96 Relative Strength Rating.
The Composite Rating combines five different metrics into one easy-to-read number. Among other things, it combines recent EPS growth, sales, margins and return on equity.
The potato stock's lofty RS Rating places its price performance in the top 4% of all stocks in the IBD database. The rating has also been improving for the past 6 months, according to IBD MarketSmith.
LW stock ranks first in the Food-Packaged industry group, which in turn ranks 9th in the IBD universe of 197 sectors. It is also on the elite IBD 50 stock list, which identifies top growth stocks based on strong technical and fundamental ratings as well as price performance.
The food producer makes and delivers packaged potato products, including frozen fries, to restaurants and retailers in over 100 countries. It has joint ventures in France and the Netherlands, and recently invested $240 million in an Argentinian manufacturing facility.
Strong Earnings Record Due To Price Mix
The Eagle, ID company reported quarterly sales of $1.1 billion in fiscal Q1 2023, 14% higher than Q1 2022's $984 million. Earnings of $1.60 per share marked a staggering 700% increase from the prior fiscal year.
The company's global segment includes the top 100 North American restaurants and chains. The potato stock performed admirably in this division, offsetting inflationary and supply-chain induced cost pressures with a favorable price mix.
The segment's price mix increased by 14% in the quarter while sales rose 12%. The results are even more impressive because volume declined 2% as Lamb Weston shifted to higher-margin sales channels.
Sales to restaurants outside the top 100 also grew 14%, with a 26% increase in the price mix offsetting a 12% volume decrease. Branded and retail products rose 28% even though volume fell 4%, powered by a 34% price mix hike.
The company affirmed its 2023 sales target of $4.7 — $4.8 billion during the earnings call, which is at the higher end of the prior outlook.
Earlier, the company announced a 24.5 cent per share quarterly dividend, payable to shareholders of record as of Nov. 4.
Leading Potato Stock Shows Strong Institutional Interest
Mutual funds hold 47% of outstanding shares. Strong institutional interest indicates strength, according to the IBD CAN SLIM investment strategy.
Among ETFs, LW stock is a top holding in the Invesco S&P 500 Equal Weight Consumer Staple ETF and First Trust Consumer Staples AlphaDEX Fund.
