Heinz (KHC) & Lamb Weston (LW) Financial Review

Heinz (NASDAQ: KHC) and Lamb Weston (NYSE:LW) are both consumer staples companies, but which is the better investment? We will contrast the two companies based on the strength of their institutional ownership, risk, analyst recommendations, profitability, dividends, valuation and earnings.

Valuation & Earnings

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This table compares Heinz and Lamb Weston’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Heinz $26.23 billion 2.82 $11.00 billion $3.55 17.12
Lamb Weston $3.17 billion 3.02 $324.80 million $2.32 28.24

Heinz has higher revenue and earnings than Lamb Weston. Heinz is trading at a lower price-to-earnings ratio than Lamb Weston, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Heinz and Lamb Weston’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Heinz 41.93% 7.20% 3.62%
Lamb Weston 11.75% -69.53% 14.24%

Risk and Volatility

Heinz has a beta of 0.59, meaning that its share price is 41% less volatile than the S&P 500. Comparatively, Lamb Weston has a beta of 0.78, meaning that its share price is 22% less volatile than the S&P 500.

Insider and Institutional Ownership

63.3% of Heinz shares are owned by institutional investors. Comparatively, 80.7% of Lamb Weston shares are owned by institutional investors. 26.8% of Heinz shares are owned by company insiders. Comparatively, 0.3% of Lamb Weston shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Dividends

Heinz pays an annual dividend of $2.50 per share and has a dividend yield of 4.1%. Lamb Weston pays an annual dividend of $0.76 per share and has a dividend yield of 1.2%. Heinz pays out 70.4% of its earnings in the form of a dividend. Lamb Weston pays out 32.8% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years.

Analyst Recommendations

This is a summary of current recommendations for Heinz and Lamb Weston, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Heinz 2 4 13 0 2.58
Lamb Weston 0 2 3 1 2.83

Heinz presently has a consensus price target of $83.63, indicating a potential upside of 37.56%. Lamb Weston has a consensus price target of $59.17, indicating a potential downside of 9.68%. Given Heinz’s higher possible upside, analysts clearly believe Heinz is more favorable than Lamb Weston.

Summary

Heinz beats Lamb Weston on 9 of the 17 factors compared between the two stocks.

Heinz Company Profile

The Kraft Heinz Company is a food and beverage company. The Company is engaged in the manufacturing and marketing of food and beverage products, including condiments and sauces, cheese and dairy, meals, meats, refreshment beverages, coffee and other grocery products. The Company’s segments include the United States, Canada and Europe. The Company’s remaining businesses are combined as Rest of World. The Rest of World consists of Latin America and Asia, Middle East and Africa (AMEA). The Company provides products for various occasions whether at home, in restaurants or on the go. The Company’s brands include Heinz, Kraft, Oscar Mayer, Philadelphia, Planters, Velveeta, Lunchables, Maxwell House, Capri Sun, and Ore-Ida. The Company’s products are sold through its own sales organizations and through independent brokers, agents and distributors to chain, wholesale, cooperative and independent grocery accounts, convenience stores, drug stores, value stores, bakeries and pharmacies.

Lamb Weston Company Profile

Lamb Weston Holdings, Inc. produces and markets value-added frozen potato products worldwide. It operates through four segments: Global, Foodservice, Retail, and Other. The company offers frozen potatoes, sweet potatoes, and appetizers under the Lamb Weston brand name, as well as various customer labels. It serves retail and foodservice customers; grocery, mass, club, and specialty retailers; and businesses, independent restaurants, regional chain restaurants, and convenience stores, as well as educational institutions. The company was founded in 1950 and is headquartered in Eagle, Idaho.

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