Jefferies Upgrades Lamb Weston (LW) to Buy
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(Updated - June 8, 2021 7:27 AM EDT)
Jefferies analyst Rob Dickerson upgrades Lamb Weston (NYSE: LW) to Buy rating (from Hold) with a price target of $100.00 (from $84.00).
The analyst comments "When the pandemic hit last year, fears emerged quickly that volumes wouldn’t only plummet for LW, but that pricing could contract, leaving margins impaired. The situation now is completely different. Not only is foodservice demand rebounding quickly, but still-tight industry capacity and inflated edible oil costs also bode well for a return to pricing power across all segments. And this is while the company has contracted for lower potato costs this year and COVID-driven costs should abate as we move through FY’22, implying quick margin recovery timing. Lastly, given a historically high cash position, accelerated financial deleverage should drive EPS revisions higher. Consensus has yet to layer in Lamb’s ability to price and its ability to accelerate financial deleverage. Given these factors, we’re looking for $3.90 in EPS in FY’23, or ~8% ahead of consensus. For perspective, consensus was looking for ~ $4.00 in FY’22 EPS pre-pandemic—we believe getting back there will occur much more quickly than expected."
Shares of Lamb Weston closed at $83.80 yesterday.
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