We see value in narrow-moat Lamb Weston’s shares, now sitting in 4-star territory and more than 20% below our $110 fair value estimate. Although near-term risks are prevalent, we see attractive upside that more than justifies these challenges.
LW is trading within a range we consider fairly valued.
Price
$86.77
Fair Value
$627.00
Uncertainty
Medium
1-Star Price
$566.40
5-Star Price
$72.00
Economic Moat
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Capital Allocation
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Bulls Say, Bears Say
Bulls
Lamb Weston’s products generate high margins for restaurants, increasing their loyalty and willingness to pay for consistency and quality.
Bears
Poor execution, like the initial rollout of its new ERP system in fiscal 2024, can overshadow its competitive advantages and lead to lost market share and profit margin erosion.
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Lamb Weston is North America’s largest and the world’s second-largest producer of branded and private-label frozen potato products, both by volume and value. The company’s portfolio is anchored by French fries, but it also sells sweet potato fries, tater tots, diced potatoes, mashed potatoes, hash browns, and chips. Nearly 70% of revenue comes from its home market of North America, with none of the other 100 countries the company sells into representing a significant share. McDonald’s is Lamb Weston’s single largest customer at 13% of fiscal 2023 sales, with no other company representing more than 10%. Lamb Weston became an independent company in 2016 when it was spun off from Conagra.