Lamb Weston has been a hot potato since hitting a bottom earlier this year, but the rebound might be over. The results of the first quarter are strong and point to solid results in the future. Lamb Weston stock may be capped by other factors that may cause another correction in the price action. Two qualities that can be found in other fundamentally strong consumer staple stocks are valuation and dividends. Both of these stocks are less expensive than Lamb Weston, and both pay more than double the yield.
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Lamb Weston shares spiked in the wake of the FQ1 earnings report, which can only be described as a knee-jerk reaction to some positive news. The results included a better than expected margin, but the guidance was not changed. The earnings power of the company has peaked for the year and the following quarters may be weaker than anticipated.
It makes sense that while shares are up strongly following the report, they also show strong resistance at these lofty levels and what could turn into a very nasty bearish candle pattern. A doji formation confirms resistance at a previously confirmed level and the candle pattern is a shooting star whose shadow makes it one of the largest candles in a year.
Three analysts have current coverage. Why is the stock attractive to retail investors? The consensus rating is a Moderate Buy and the price target is well below the current price action. If not a stop or reversal, the high price target suggests a pause in the market. Lamb Weston may not scream "BUY ME!" at this time.
Strong demand for packaged foods led General Mills to raise its guidance. A new all-time high for the stock, which has pulled back to support at the 30-dayEMA, could be seen as an attractive entry point. The analysts increased their price targets after the report. The consensus target for General Mills is still in line with the price action but it is moving in a different direction. General Mills trades at 19 times earnings and pays 2% in yield, while the company that is slated to report at the end of October trades closer to 14 times earnings and pays more than 4% in yield.
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