Analyzing Lamb Weston (LW) and Kraft Heinz (KHC)

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

Risk & Volatility

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

Dividends

Lamb Weston pays an annual dividend of $0.76 per share and has a dividend yield of 1.2%. Kraft Heinz pays an annual dividend of $2.50 per share and has a dividend yield of 4.1%. Lamb Weston pays out 32.8% of its earnings in the form of a dividend. Kraft Heinz pays out 70.4% 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.

Earnings & Valuation

This table compares Lamb Weston and Kraft Heinz’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Lamb Weston $3.17 billion 2.85 $324.80 million $2.32 26.63
Kraft Heinz $26.23 billion 2.81 $11.00 billion $3.55 17.05

Kraft Heinz has higher revenue and earnings than Lamb Weston. Kraft 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.

Insider & Institutional Ownership

80.6% of Lamb Weston shares are held by institutional investors. Comparatively, 63.2% of Kraft Heinz shares are held by institutional investors. 0.3% of Lamb Weston shares are held by insiders. Comparatively, 26.8% of Kraft Heinz shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Analyst Ratings

This is a breakdown of current ratings and recommmendations for Lamb Weston and Kraft Heinz, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Lamb Weston 0 2 3 1 2.83
Kraft Heinz 1 4 13 0 2.67

Lamb Weston currently has a consensus target price of $59.17, indicating a potential downside of 4.23%. Kraft Heinz has a consensus target price of $83.47, indicating a potential upside of 37.87%. Given Kraft Heinz’s higher probable upside, analysts clearly believe Kraft Heinz is more favorable than Lamb Weston.

Profitability

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

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

Summary

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

About Lamb Weston

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.

About Kraft Heinz

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.

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