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Lamb Weston and Logitech have been highlighted as Zacks Bull and Bear of the Day

For Immediate Release

Chicago, IL – February 9, 2023 – Zacks Equity Research shares Lamb Weston Holdings, Inc. LW as the Bull of the Day and Logitech International LOGI as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Atour Lifestyle Holdings Ltd. ATAT, ConAgra Foods, Inc. CAG, OneSpaWorld Holdings Ltd. OSW and Flight Centre Travel Group Ltd. FGETF.

Here is a synopsis of all six stocks.

Bull of the Day:

Today we dig into a stock that has not only surged in 2023 alongside much of the market, but also posted a fantastic 2022.

Lamb Weston Holdings, Inc. runs a straightforward frozen potatoes business that’s booming and should do well if the U.S. economy keeps humming or slips into a recession.

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The ecstatic start to 2023 has investors diving head first back into beaten-down technology stocks on the hopes that the U.S. economy is headed for a goldilocks zone. Even if Wall Street is right and the Fed’s war on inflation is all but won without causing a recession and the earnings outlook won’t get any worse, growth stocks that rebounded could be in for a pullback of some sort.

Meet a Potato Company

Lamb Weston, which spun off from ConAgra Foods, Inc. in the fall of 2016, is one of the largest suppliers of frozen potatoes in the world, selling a nearly endless array of potato-based offerings. LW makes everything from classic fries to sweet potatoes waffle fries and everything imaginable in between. The company also sells potato chips, hash browns, mashed potatoes, and beyond, alongside some frozen vegetable

Lamb Weston sells its frozen potato products to restaurants and retailers around the world. LW’s growth has been rather impressive outside of its small covid-based downturn.

Simply put, fries, potatoes, and potato-based foods are core menu offerings at restaurants across the U.S. and internationally, as well as household staples.

It is far from a flashy business, but Lamb Weston plays a crucial role in providing one of the most popular food items out there right now and for years to come. The company also has tons of pricing power, which we will see shortly.

Recent Growth and Outlook

Lamb Weston topped our Q2 FY23 earnings and revenue estimate at the start of January.

LW’s revenue soared by 27% YoY to $1.28 billion even though its volume dipped by 3%, primarily “reflecting an inability to fully serve customer demand” in LW’s foodservice and retail channels. Lamb Weston cited supply chain issues, commodities shortages, and other reasons for the slowing volume. Volumes fell last quarter as well.

Even though volumes dipped, Lamb Weston flexed its pricing power, as well as the resiliency and essential aspect of its business by raising its price/mix by 30%. Meanwhile, its adjusted earnings skyrocketed 172% to $1.28 per share to crush our bottom-line estimate by 73%.

LW has now topped the Zacks consensus estimate by an average of 53% in the trailing four quarters. Despite large-scale macroeconomic setbacks, Lamb Weston executives boosted their outlook, which is no easy task at the moment.

Zacks estimates call for Lamb Weston’s revenue to climb 20% in its fiscal 2023 (period ending in May 2023) to hit $4.90 billion and then surge another 16% in FY24 to reach $5.67 billion. This would follow 12% revenue growth in fiscal 2022.

Lamb Weston is projected to nearly double its adjusted earnings in FY23, with it set to climb 90% this year and another 13% next year to reach $4.47 per share (vs. $2.08 per share in FY22). The company’s strong showing combined with its improved outlook forced analysts to once again boost their EPS estimates.

Lamb Weston’s consensus Q3 earnings outlook is up 34% since its release, with Q4 up 21%. Meanwhile, its adjusted fiscal 2023 EPS estimate is up 31% and FY24 has jumped 15%. The recent positivity is part of a longer-term uptrend for LW’s earnings outlook and it helps LW capture a Zacks Rank #1 (Strong Buy) right now.

Other Fundamentals

Lamb Weston stock has jumped around 230% since it went public in late 2016 to destroy its industry’s 2% run during this stretch, as well as the S&P 500’s 97% and the Zacks Consumer Staples sector’s 8%.

LW shares have soared over 50% in the past 12 months vs. the S&P 500’s 9% fall and its industry’s 1% dip. This run includes a 19% jump in the trailing three months and a big post-Q2 release spike at the start of January that has it up 11% YTD.

Even though it’s gone on such a solid run, LW still trades 7% beneath its average Zacks price target at around $99 per share. And despite the climb, Lamb Weston stock is not overbought (70 or higher) when it comes to RSI levels, hovering at around 59 at the moment.

On the valuation front, Lamb Weston shares trade at 22.9X forward earnings, which is below its own five-year median and 27% under its highs during this timeframe. The stock does trade at a premium compared to Zacks' Consumer Staples sector, but LW has crushed this group of stocks during the past five years (82% vs. 2%).

Lamb Weston pays a dividend that currently yields 1.1% and it has roughly $240 million authorized for share repurchases under its existing program. On top of that, four out of the five brokerage recommendations Zacks has are “Strong Buys.”

Bottom Line

Lamb Weston is set to benefit from its stature as a key provider of consumer and restaurant staples.

LW shares might be able to maintain their momentum given Lamb Weston’s valuation levels and impressive growth outlook, especially compared to the beaten-down growth stocks that have skyrocketed to start 2023.

Lamb Weston offers investors both near-term and long-term upside potential and could play a nice part within a diversified portfolio because everyone needs some potatoes to go along with their meat.

Bear of the Day:

Logitech International makes everything from keyboards to streaming-focused video cameras. Logitech’s sales skyrocketed practically overnight during the early months of the pandemic as people splurged on video gaming accessories and essential work-from-home tech.

Like many early pandemic winners, Logitech stock became a victim of its own success. And now Logitech’s earnings and revenue outlook is trending in the wrong direction.

PC and Gaming Peripherals

Logitech is a standout in the peripheral equipment space. Logitech caters to everyone from hardcore gamers and remote workers to businesses and beyond. Logitech’s offerings include mice & keyboards, headsets & webcams, streaming-focused cameras, microphones, & lighting, as well as speakers, and more.

The Lausanne, Switzerland-headquartered firm has grown rather steadily over the last 20 or so years. Logitech posted seven-straight years of revenue expansion, including a 76% YoY surge during its fiscal 2021 that saw it climb from $2.98 billion to $5.25 billion.

The remote works and home entertainment boom helped Logitech hit a homerun during the early months of the pandemic. LOGI even followed up its stellar, impossible-to-compete-against year with another roughly 4% sales growth during its fiscal 2022.

But the covid windfall is now gone, with the firm having posted five-straight quarterly sales declines, including a 22% YoY drop in Q3 FY23, which it reported on January 23.

Logitech’s earnings outlook has continued to fade as it deals “with macroeconomic conditions, including currency exchange rates and inflation, as well as lower enterprise and consumer spending.” Zacks estimates call for its FY23 revenue to fall 17% and for its adjusted earnings to sink by 31% against last year.

Bottom Line

Logitech’s earnings outlook has tumbled, with its near-term outlook fading the fastest. The firm’s most accurate estimates for the coming two quarters also come in well below the already beaten-down Zacks consensus.

All of LOGI’s negative bottom-line revisions help it land a Zacks Rank #5 (Strong Sell) at the moment. Logitech’s Peripheral Equipment industry is also currently ranked in the bottom 32% of over 250 Zacks industries.

Logitech is still a strong company that makes top-of-the-line products that aren’t going anywhere. LOGI simply experienced an unprecedented covid pull forward/windfall that makes its YoY comparisons very harsh. Plus, the economy is slowing and people are cutting back on many non-essential items.

Logitech shares have mounted a bit of a comeback, up around 30% off their October lows. Despite the climb, LOGI still trades 60% below its summer of 2021 peaks.

The recent comeback of all things growth might inspire more people to jump back into Logitech, but the boom could also lead to a rather larger pullback. It seems wise for near-term investors to possibly stay away from playing LOGI stock right now.

Additional content:

3 International Travel Companies on Our Radar Now

The travel industry has been undergoing a steady turnaround, as consumers the world over continue to return to travel after the pandemic. In fact, the three big card providers Mastercard, Visa and American Express highlighted travel as a bright spot in their recent quarterly earnings announcements. But the big question is, how will this market do in 2023?

According to the U.S. Travel Federation (as quoted by Forbes), travel spending will be higher than in 2022 and also higher than 2019 (pre-pandemic) levels. Overall, certain conditions and trends that existed in 2022 are changing this year while others are continuing.

Leisure travel for example is going to remain strong, and the distinction between business and pleasure will continue to blur, with business travelers extending their trips or remote workers taking a trip while adjusting their workloads, as Tony Capuano, CEO of Marriott International revealed to Chip Rogers, President and CEO of the American Hotel and Lodging Association.

A Forbes article also says that “hush” trips by remote workers could be a new trend in 2023, where employees pick a vacation rental service that could help them set up their work stations for a week or two in addition to providing leisure services. Even larger hotels are jumping into the space and trying to accommodate these blended trips. They’re offering better Internet connectivity; discounts for extended stay; pools, bars and fitness centers; and even more thoughtful meal plans.

Other than these blended trips, business travel remains the slowest to recover, according to Marriot’s Capuano. But it has the potential to be a big comeback story in 2023.

There are several challenges as well, as pointed out In Deloitte’s 2023 outlook for the travel industry, which looks like a rather pessimistic take on the whole situation. Deloitte points out that travel demand had already started to soften in September last year, which could be temporary but could also be a lasting situation, as consumers reign in expenses because of inflation, high interest rates and the whole range of macro concerns.

But as we have seen in the latest inflation and jobs reports, the economy is holding up much better than many of us expected, which seems to indicate that we won’t have a recession after all. Moreover, with inflation coming down and the jobs market strong, there should be no need to tighten purse strings.

Some consumer surveys by market watchers and analysts in fact show a strong desire to spend on travel, especially in the 18–34 age bracket. The trend of advance planning and booking is also coming back. As a recent American Express Travel survey found, 50% of respondents were already planning their summer 2023 back in December.

This shows a whole lot more optimism and confidence in consumers than we have seen in recent times. Even in 2022, when travel demand was so strong, booking windows were relatively short, as consumers fretted about committing themselves too far ahead of time.

Deloitte is also not optimistic about business travel in 2023, although it sees event-driven travel as a big driver.

The report also talks about the staffing challenges that hotels have been seeing for a while now. Labor remains tight and will be an issue that hotels have to contend with this year. And if the economy softens materially from the current level, of course business travel will remain weak, which could help in this respect.

It is optimistic about international travel, despite the rising airfares. And China’s opening up should certainly be a growth factor for 2023.

Another factor that will be in play this year is the dollar. The stronger dollar helped international travelers last year and although there’s no consensus, most analysts are betting on the chances that it will slide a bit this year. Therefore, international travelers may be expected to take exchange rates into consideration when booking their stay. Cruise ships may be a choice for many, as there is pent up demand in that segment.

With that as the backdrop, let’s take a look at a few travel companies that are looking good right now. All of them belong to the Zacks Leisure and Recreation Services industry, which is currently in the top 32% of Zacks-classified industries:

Atour Lifestyle Holdings Ltd.

Headquartered in Shanghai, China, Atour Lifestyle Holdings operates a chain of themed hotels in China, including music hotels, basketball hotels and literary hotels catering to the various lifestyles of consumers across different age groups, with varied interests. The company also provides hotel management services, including day-to-day management services of the hotels for the franchisees; and sells hotel supplies and other products. As of June 30, 2022, its hotel network covered 834 hotels spanning 151 cities in China.

The reopening in China should be the biggest driver of results this year, and the analyst covering the stock has raised the 2023 earnings estimate by $1.16 (27.6%) in the last 60 days. This represents a 208.1% increase from 2022 earnings.

The shares carry a Zacks Rank #1 (Strong Buy).

OneSpaWorld Holdings Ltd.

Nassau, Bahamas-based OneSpaWorld Holdings Limited operates health and wellness centers onboard cruise ships and at destination resorts worldwide. Its health and wellness centers offer traditional body, salon and skin care services and products; self-service fitness facilities, specialized fitness classes, and personal fitness training; pain management, detoxifying programs and body composition analyses; weight management programs and products; and medi-spa services.

The company also provides its guests access to beauty and wellness brands, including ELEMIS, Kérastase, and Dysport, with some of these brands being exclusively for the cruise market. As of December 31, 2021, it offered health, wellness, fitness, beauty services, treatments, and products onboard 170 cruise ships and at 52 destination resorts.

Analysts are looking for 277.4% revenue growth in 2022 as well as 155.6% earnings growth when the company reports on March 1. For 2023, revenue growth is expected to be 24.2% and earnings growth 91.0%. The 2023 estimate has increased 3 cents (about 7%) in the last 30 days.

The shares carry a Zacks Rank #1.

Flight Centre Travel Group Ltd.

Headquartered in South Brisbane, Australia, Flight Centre Travel Group Limited provides travel retailing services for leisure and business travelers in Australia, New Zealand, Americas, Europe, the Middle East, Africa and Asia. In addition to this, it supplies products to its national and international network of travel retail outlets, tours, foreign currency exchange, employee benefit services, etc. Some of its brands are Flight Centre, Student Flights, Travel Associates, Liberty Travel, Infinity Holidays and GOGO Vacations.

Flight Centre is expected to see revenue and earnings growth of a respective 20.1% and 148.0% in 2023. The estimate for 2023 (ending June) has increased 108.3% in the last 7 days while the 2024 estimate increased a couple of cents.

The shares carry a Zacks Rank #2 (Buy).

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Logitech International S.A. (LOGI) : Free Stock Analysis Report

Conagra Brands (CAG) : Free Stock Analysis Report

Lamb Weston (LW) : Free Stock Analysis Report

Flight Centre Ltd. (FGETF) : Free Stock Analysis Report

OneSpaWorld Holdings Limited (OSW) : Free Stock Analysis Report

Atour Lifestyle Holdings Limited Sponsored ADR (ATAT) : Free Stock Analysis Report

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