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Lamb Weston Holdings Inc LW

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Narrow-Moat Lamb Weston Experiencing Pandemic Recovery Pains; Shares Appear Overvalued

Analyst Note

| Rebecca Scheuneman, CFA |

Narrow-moat Lamb Weston's fiscal third quarter sales dropped 4.4%, much better than the 12% decline we had forecast and a marked improvement from the 12% fall suffered in the fiscal first half. Sales to global food-service chains (largely quick-serve) fell 2% while sales to smaller food-service outlets contracted 22%, partially offset by 23% growth at retail. We plan to bump our fiscal 2021 revenue forecast to a 5% drop from 6% previously, and we continue to think sales will return to prepandemic levels at the end of calendar 2021, with mid-single-digit long-term sales growth expectations intact.

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Company Profile

Business Description

Lamb Weston is the world's second- largest producer of branded and private-label frozen potato products, such as French fries, sweet potato fries, tots, diced potatoes, mashed potatoes, hash browns, and chips. The company also has a small appetizer business that produces onion rings, mozzarella sticks, and cheese curds. While 80% of revenue are U.S.-based, the firm also sells its products in Canada, Japan, China, Korea, Mexico, and several other countries. About 86% of the firm's products are distributed into the food-service channel, while the remaining 14% is sold through retail. Lamb Weston became an independent company in 2016 when it was spun off from Conagra.

599 S. Rivershore Lane
Eagle, ID, 83616
T +1 208 938-1047
Sector Consumer Defensive
Industry Packaged Foods
Most Recent Earnings Feb 28, 2021
Fiscal Year End May 31, 2021
Stock Type Slow Growth
Employees 7,700