The Big Idea

Lamb Weston (NYSE: LW) – one of the world’s largest frozen French fry makers – appears to be waking up from its 2024 funk. After a rough patch last year, the company has “returned to growth in the second half of the year with momentum in customer wins,” CEO Mike Smith enthused in the latest results (https://www.businesswire.com/news/home/20250723251810/en/Lamb-Weston-Reports-Fiscal-Fourth-Quarter-and-Full-Year-2025-Results-Provides-Fiscal-Year-2026-Outlook#:~:text=%E2%80%9CLamb%20Weston%20returned%20to%20growth,enter%20fiscal%202026%20with%20increased). Volume growth is robust, market share is rising, and management’s “Focus to Win” turnaround plan (with ~$250M in cost savings) is starting to kick in (https://www.businesswire.com/news/home/20250723251810/en/Lamb-Weston-Reports-Fiscal-Fourth-Quarter-and-Full-Year-2025-Results-Provides-Fiscal-Year-2026-Outlook#:~:text=%E2%80%9CLamb%20Weston%20returned%20to%20growth,enter%20fiscal%202026%20with%20increased) (https://seekingalpha.com/pr/20345844#:~:text=%E2%80%9COur%20performance%20this%20quarter%20reflects,program%20target%20for%20fiscal%202026)). Today’s stock action is confirming the turnaround story – Lamb Weston has been showing strong momentum (up ~12.5% last week and ~22.5% in 30 days), reclaiming its 50-day SMA and holding above its rising 20-day SMA. The set-up is a classic trend-within-a-trend: the stock has broken out of its consolidation and is gently pulling back into our entry zone ($48.40–50.10). Against this backdrop of renewed growth and action by management, buying the dip looks like a compelling “buy the rumor” strategy ahead of the next catalyst (likely the early-March earnings call).

What’s Changed / Why Now

Momentum is back: In its Q4 FY2025 release, Lamb Weston noted that after supply-chain hiccups and soft Q2/Q3, it “returned to growth in the second half of the year,” driven by new contract wins across all channels (https://www.businesswire.com/news/home/20250723251810/en/Lamb-Weston-Reports-Fiscal-Fourth-Quarter-and-Full-Year-2025-Results-Provides-Fiscal-Year-2026-Outlook#:~:text=%E2%80%9CLamb%20Weston%20returned%20to%20growth,enter%20fiscal%202026%20with%20increased). Net sales in Q4 grew ~4% year-over-year, and volume was up 8% on lapping last year’s disruptions (https://www.businesswire.com/news/home/20250723251810/en/Lamb-Weston-Reports-Fiscal-Fourth-Quarter-and-Full-Year-2025-Results-Provides-Fiscal-Year-2026-Outlook#:~:text=Net%20sales%20increased%20%2463,reflecting%20efforts%20to%20partner%20with). Management is explicitly targeting better execution and efficiency: the new “Focus to Win” plan will save at least $250 million by FY2027 from cost cuts, working-capital improvements, and lower capex (https://www.businesswire.com/news/home/20250723251810/en/Lamb-Weston-Reports-Fiscal-Fourth-Quarter-and-Full-Year-2025-Results-Provides-Fiscal-Year-2026-Outlook#:~:text=%E2%80%9CLamb%20Weston%20returned%20to%20growth,enter%20fiscal%202026%20with%20increased). These initiatives should boost cash flow and margins in 2026. Indeed, in the latest Q2 FY2026 update, Lamb Weston reported 8% volume growth partly offsetting an 8% price decline – a sign that product demand is healthy (https://seekingalpha.com/pr/20345844#:~:text=Net%20sales%20increased%20%2417,Volume%20growth%20was). The CEO praised the team’s execution, noting that they “remain on track” for the company’s $100M cost-saving target this year and even approved a 3% dividend increase (the 14th year in a row of raises) (https://seekingalpha.com/pr/20345844#:~:text=%E2%80%9COur%20performance%20this%20quarter%20reflects,%E2%80%9D). Put simply: the smoke is clearing, and LW’s turnaround plan is assembling real progress beneath the surface. The stock is beginning to reflect this positive shift.

Technicals supportive: On the charts, LW has been carving higher lows since late 2025. Crucially, it has held above the rising 20-day SMA (~$45.15) and just recaptured the 50-day SMA (~$48.82). This is a textbook trend-pullback setup: the stock ran up into overbought RSI (~68.6) and is now pulling back into our entry zone of $48.40–50.10, where technical support converges. Buying here lets us “buy the dip” in a strong uptrend while keeping a logical stop just below the 20-day (around $45.10) – matching our plan. If momentum indeed continues, the active target is the low-to-mid $50s (we set $53.80) – essentially retesting January 2025 highs. A quick move there would be only a mild extension beyond recent losses, not a wildly improbable move.

Catalysts Ahead

  • Q3 FY2026 Earnings (likely early March 2026): Investors will hear management’s updated sales/guidance. Given the recent volume growth and cost savings, any upward revisions could spark another leg higher. Focus will be on how much price/mix is rebounding and confirmation of market-share gains.
  • “Focus to Win” Execution: Management is on the hook to deliver its cost-savings roadmap (already $100M planned for FY26, $250M by FY27). Updates on CAPEX cuts or G&A savings could drive upside surprises.
  • Fast-Food Demand: Lamb Weston supplies big chains (McDonald’s, KFC, Taco Bell, etc.). If overall restaurant traffic or global franchise expansion takes off (post-COVID normalizing), LW stands to benefit. Look for any news of new contracts or menu innovations (e.g. “Refrigerator-friendly” fries, seasoned products) to widen their moat.
  • Capital Returns / Dividends: Continued 3–5% dividend hikes (as recently declared) and share buybacks would signal confidence. The board just nodded to a higher payout, helping sentiment.
  • Macro Tailwinds: Broader stability in food commodity markets (potato supply normalizing) or positive consumer spending data could buoy the stock as a defensive staple.

The Numbers That Matter

Q4 FY2025 Growth: Net sales +4% YoY to $1.676B (volume +8%) (https://www.businesswire.com/news/home/20250723251810/en/Lamb-Weston-Reports-Fiscal-Fourth-Quarter-and-Full-Year-2025-Results-Provides-Fiscal-Year-2026-Outlook#:~:text=Net%20sales%20increased%20%2463,reflecting%20efforts%20to%20partner%20with). For Q2 FY2026, net sales ~$1.618B (flat YoY before FX), with volume +8% (https://seekingalpha.com/pr/20345844#:~:text=Net%20sales%20increased%20%2417,Volume%20growth%20was).

Profit & Cash Flow: Latest quarter EPS was $0.44, up ~276% YoY (from a tough compare) (https://seekingalpha.com/pr/20345844#:~:text=Income%20from%20operations%20%20,). Full-year operating income in FY2025 was $139.2M in Q2 (+652% YoY) on $6.45B sales (https://seekingalpha.com/pr/20345844#:~:text=Income%20from%20operations%20%20,). Trailing P/E is ~17.7x – reasonable for a growing staple.

Dividend Yield: Payout is rising in the low 3% range (2.97% yield) – a steady income kicker. The board raised the quarterly dividend 3% in Dec 2025 (https://seekingalpha.com/pr/20345844#:~:text=categories%2C%20demonstrating%20Lamb%20Weston%E2%80%99s%20commitment,%E2%80%9D), continuing a multi-year trend.

Balance Sheet: Moderate leverage (Debt/Equity ~2.23) but ample assets (over $7.33B total) and healthy cash flow ($178M op cash last quarter). FCF should improve as working capital turns favorable and capex remains disciplined.

52-Week Range: $39.79–67.07. The stock has recovered from its $40 lows and is now ~27% off the year-low, with ~24% upside to the old high.

Technical / Price Action Context

Lamb Weston is a trend-following pullback setup. The 20-day SMA turned up at ~$45.15 and has provided support through recent dips. The stock successfully reclaimed its 50-day SMA (~$48.8) in late January, confirming the uptrend’s resumption. We aim to buy into the $48.40–50.10 zone, where previous resistance has turned support and multiple moving averages coalesce. Our stop at $45.10 sits just below the rising 20-day SMA (currently ~$45.1) – a clean invalidation if broken. With upside targets near $53.8 (low-mid $50s), the risk/reward is favorable (roughly 9% gain target vs ~6% risk if stopped). In short, the chart is telling us to buy weakness in a strong trend, not chase a breakout. As long as LW stays above its 20-day (currently ~45), the bull case remains on track.

Risks & What Could Go Wrong

  • Extended Run-Up: LW’s RSI (~68) is high – some short-term pullback before continuation is possible. If we buy too early, a bounce off the 20-day could still precede a retest of the entry zone.
  • Loss of SMAs: If price tumbles below the 50-day/20-day confluence (around $48–$45), it could signal real momentum loss. That break would invalidate our bullish scenario and trigger the stop.
  • Demand Slowdown: A return of weak restaurant traffic (e.g. due to rising costs or consumer belt-tightening) could dent volumes. Even if Lamb Weston is gaining share, a broad slowdown in foodservice is a headwind.
  • Macro Risk: In a market-wide risk-off (e.g. equity selloff, bond yield spike), even relatively defensive consumer stocks can be sold down. Lamb Weston could lag if investor sentiment sours, at least temporarily.

Bottom Line

Lamb Weston is arguably the “bellwether” of the frozen fries business, and right now the signals are turning green. After a painful 2024, management’s results and strategic pivots suggest the worst is behind them. We see a sweetspot trade: buy into the $48.4–50.1 zone (supported by rising moving averages and recent demand strength) with a stop just below the 20-day SMA (“lights out” if broken). The target in the low-to-mid $50s is modest (about +9% from current levels) and well within reach by late-February, especially if March earnings deliver. In other words, we’re buying the dip in an uptrend, not hoping for a miracle turn. Lamb Weston’s turnaround appears real, and with a high-odds setup on the charts, this pullback looks like an opportunity, not a trap.

Disclaimer: Not investment advice. This is a speculative bullish argument consistent with the given trade plan. All risks apply; do your own due diligence.

Sources

Sources listed in the original article are reproduced below.