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

For Immediate Release

Chicago, IL – November 7, 2022 – Zacks Equity Research shares Lamb Weston LW as the Bull of the Day and Align Technology, Inc. ALGN asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on The Walt Disney Company DIS, BJ’s Wholesale Club BJ and Take-Two Interactive TTWO.

Here is a synopsis of all five stocks.

Bull of the Day:

Few areas of the market have managed to stay above the selling in 2022 outside of the booming energy sector. Lamb Weston stock didn’t just avoid the fall, it has climbed over 30% YTD to hit new 52-week highs recently, as it thrives amid an economic downturn.

A Consumer Staples Cornerstone

Lamb Weston 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 potato waffle fries and everything imaginable in between. The company also sells potato chips, hash browns, mashed potatoes, and beyond, alongside some frozen vegetables.

Lamb Weston sells its frozen potato products to restaurants and retailers around the world. The company’s growth has been rather impressive outside of its covid-based downturn, as fries and potatoes are core parts of diets in the U.S. and beyond.

Recent Growth and Outlook

Lamb Weston topped our Q1 FY23 (period ended on August 28) earnings estimate in early October. The firm grew its revenue by 14% YoY to $1.13 billion even though volumes declined due to “softer casual dining and full-service restaurant traffic in the U.S. as well as the timing of shipments to large chain restaurant customers.” LW was able to raise its prices nearly across the board, with its price/mix up 19%.

Meanwhile, its adjusted earnings soared 317% to $0.75 per share to crush our bottom-line estimate by 44%. LW has now topped the Zacks consensus estimate by an average of 47% in the trailing four quarters. Despite large-scale macroeconomic setbacks, Lamb Weston executives said it was on track to deliver on the higher end of its fiscal 2023 financial targets.

Zacks estimates call for Lamb Weston’s revenue to climb roughly 15% both this year and next to go from $4.10 billion in FY22 to $5.39 billion in FY24. This would follow 12% revenue growth in fiscal 2022.

Lamb Weston’s adjusted earnings are projected to soar 46% this year and another 28% next year to reach $3.90 per share. Plus, its consensus EPS estimates for FY23 and FY24 have popped since its early October release to help it land a Zacks Rank #1 (Strong Buy) right now.

Other Fundamentals

Lamb Weston stock has soared over 50% in the past 12 months vs. the S&P 500’s 22% fall and its industry’s 3% climb. This run includes a nice 35% surge in 2022 that saw it break new 52-week highs on November 2.

Despite the climb, LW still trades below its pre-covid peaks and its average Zacks prices target offers a 10% upside to the $85.46 a share it closed at on Friday.

LW stock has climbed 185% since it was spun off from ConAgra Foods in the fall of 2016. Lamb Weston shares trade at 24.9X forward earnings, which is near its median and 22% below its highs.

The stock does trade at a premium compared to its industry, but the stock has also crushed its industry since going public (185% vs. 1.5%).

Lamb Weston pays a dividend that currently yields 1.2% and it repurchased $28 million of common stock last quarter. On top of that, four out of the five brokerage recommendations Zacks has are “Strong Buys,” alongside one “Hold.”

Bottom Line

Lamb Weston is set to benefit from its stature as a key provider of consumer and restaurant staples amid the current bout of inflation and slowing spending.

More broadly, the ongoing market and economic uncertainty favors companies with stable, boring businesses that have pricing power. Right now, it appears that investing in one half of the meat and potatoes combo could pay off for investors.

Bear of the Day:

Align Technology, Inc. is the company behind Invisalign. Align grew its revenue at an impressive rate over the last 10-plus years, and the firm's clear aligners have permanently reshaped the orthodontics industry.

Align now faces tough-to-compete against periods and a rapid slowdown in consumer spending. The company fell short of Q3 estimates in late October and its earnings outlook is fading alongside its stock price.

Align Basics

Align’s advanced clear aligner system has shaken up the orthodontics space over the last 20-plus years, as people look for viable alternatives to traditional metal braces. Align works hand-in-hand with dentists and orthodontists who help customers through the entire process from start to finish. ALGN’s success has inspired competitors to enter the market, including SmileDirectClub.

Align has helped doctors treat roughly 14 million patients with its Invisalign system, and it has expanded its reach to include wider digital services. On top of that, ALGN has slowly found success with younger customers who might have otherwise used traditional metal braces.

Tougher Conditions Ahead

ALGN posted 60% revenue growth in 2021 and it averaged 25% sales growth during the five-year stretch between FY16 and FY20. Align now faces very difficult to compete against periods of growth, including the covid rebound surge that saw customers spend big on everything from homes to straightening their teeth.

Align missed our Zacks EPS estimates by 38% on October 26, as its revenue fell 12% YoY. Inflation, rising interest rates, currency headwinds, and other broad-based economic factors are tugging at ALGN’s expansion and margins. These factors are also making consumers far less willing to shell out money to straighten their teeth during these times of economic uncertainty.

Align’s FY22 revenue is projected to fall roughly 5% YoY to $3.77 billion, based on Zacks estimates. The company’s adjusted earnings are expected to tumble 35% to $7.32 per share. ALGN’s consensus earnings estimates tumbled once again following its Q3 report to help it land a Zacks Rank #5 (Strong Sell) right now.

Bottom Line

The company’s Medical - Dental Supplies industry is in the bottom 17% of over 250 Zacks industries right now and ALGN lands an overall “D” VGM grade. Align stock, like many others, soared too high too fast during the post-lockdown surge. ALGN is now down around 75% from its 2021 peaks and closed regular trading Friday at $180.93 a share.

Some investors might want to keep Align on their watchlists with it now trading at 26.2X forward earnings. This nearly matches the Medical Products space that it had previously traded at a huge premium to and comes in below its decade-long median.

Still, Align shares have been prone to wild up-and-down moves even before Covid-19. Overall, investors might want to stay away from the stock for now given the ongoing economic uncertainty.

Additional content:

What to Expect from Disney's (DIS) Q4 Earnings

The Walt Disney Company is set to report its fourth-quarter fiscal 2022 results on Nov 8.

The Zacks Consensus Estimate for earnings has moved down 9.5% to 57 cents per share over the past 30 days, indicating an increase of 54.1% year over year.

The consensus mark for revenues is pegged at $21.11 billion, suggesting growth of 13.9% from the year-ago quarter’s reported figure.

Notably, Disney’s earnings beat the Zacks Consensus Estimate in two of the trailing four quarters and missed in the remaining two quarters, the average surprise being 16.12%.

The Walt Disney Company price-eps-surprise | The Walt Disney Company Quote

Let’s see how things have shaped up for this announcement.

Factors to Consider

Disney’s fourth-quarter fiscal 2022 results are expected to benefit from strong Disney+ growth and revival in Parks, Experiences and Products businesses.

The Zacks Consensus Estimate for Parks, Experiences & Consumer Products revenues is currently pegged at $7.32 billion, indicating growth of 34.3% from the figure reported in the year-ago quarter.

Disney+ has emerged as a key growth driver for Disney, primarily driven by its solid content portfolio. Expanding footprint has been a key catalyst.

Disney+, as of Jul 2, 2022, had 152.1 million paid subscribers compared with 116 million as of Jul 3, 2021.

The rapidly growing subscriber base has strengthened Disney’s position in the increasingly saturated streaming space currently dominated by Netflix and the growing prominence of services from Apple, Peacock, Amazon prime video and HBO Max.

The Zacks Consensus Estimate for the number of paid subscribers of Disney+ is currently pegged at 162 million, suggesting 37.2% growth year over year.

What Our Model Says

According to the Zacks model, the combination of a positive Earnings ESP and Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here.

Disney has an Earnings ESP of -7.48% and a Zacks Rank #3. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks to Consider

Here are two companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat in their upcoming releases:

BJ’s Wholesale Club has an Earnings ESP of +0.63% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

BJ’s Wholesale shares are up 16% year to date. BJ is set to report its third-quarter 2022 results on Nov 17.

Take-Two Interactive has an Earnings ESP of +4.20% and carries a Zacks Rank of 3, at present.

Take-Two shares have been down 37.4% year to date. TTWO is set to report its second-quarter fiscal 2022 results on Nov 7.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

Why Haven’t You Looked at Zacks' Top Stocks?

Our 5 best-performing strategies have blown away the S&P's impressive +28.8% gain in 2021. Amazingly, they soared +40.3%, +48.2%, +67.6%, +94.4%, and +95.3%. Today you can access their live picks without cost or obligation.

See Stocks Free >>

Media Contact

Zacks Investment Research

800-767-3771 ext. 9339

https://www.zacks.com

Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Align Technology, Inc. (ALGN) : Free Stock Analysis Report
 
TakeTwo Interactive Software, Inc. (TTWO) : Free Stock Analysis Report
 
BJ's Wholesale Club Holdings, Inc. (BJ) : Free Stock Analysis Report
 
The Walt Disney Company (DIS) : Free Stock Analysis Report
 
Lamb Weston (LW) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research