Hot stock to watch: Lamb Weston Holdings Inc (NYSE: LW) stock

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Lamb Weston Holdings Inc (NYSE: LW) stock surged 11.26% on Jan 6th, 2019 (Source: Google finance) after the company posted better than expected results for the second quarter of FY 20 and raised the outlook for FY 20. The company has reported the net income for the quarter of $140.4 million from $119.0 million, in the year-ago period. Income from operations increased about 11% to $194 million. EBITDA including joint ventures rose $38 million or 17% to $261 million. Operating profit by the base business, along with contributions from the BSW consolidation and the Australian acquisitions led to about $32 million of EBITDA growth. The total debt at the end of the second quarter was about $2.2 billion. This puts the net debt-to-EBITDA ratio at 2.6 times. The company had generated about $345 million of cash from operations in the first half of the year.

LW in the second quarter of FY 20 has reported the adjusted earnings per share of 95 cents, beating the analysts’ estimates for the adjusted earnings per share of 84 cents, according to the FactSet consensus. The company had reported the adjusted revenue growth of 12 percent to $1.02 billion in the second quarter of FY 20, beating the analysts’ estimates for revenue of $962.7 million. Volume increased 10% due to growth in the Global and Foodservice segments and price/mix rose 2% due to pricing actions and favorable mix. The company’s two acquisitions in Australia, Marvel Packers and Ready Meals, had added about a 1.5 points of volume growth. Further, the company had a couple of extra shipping days than the company had in the second quarter of fiscal 2019, due to the timing of Thanksgiving. These extra couple of days had contributed about another point of volume growth. Therefore, the company posted the gross profit growth of 14%.

Meanwhile, the investors and analysts were expecting weak sales growth on the back of a poor potato-growing season in places like Minnesota and Canada, but Lamb Weston’s farms in Idaho and the Columbia Basin were unaffected, which allowed the company to keep the french-fry factories running at full speed in the second quarter.

For fiscal 2020, the company raised its growth guidance to “the high end” of mid-single digit percentage range from just the mid-single digit range. However, the company expects the volume growth will moderate in the second half

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