Core Viewpoint - J.P. Morgan analyst Ken Goldman maintains a Neutral rating on Lamb Weston Holdings, Inc. while raising the price forecast from $65 to $66, citing medium-term risks related to supply and demand imbalances in the French fry market [1][2]. Group 1: Financial Performance - Lamb Weston reported third-quarter adjusted earnings per share of $1.10, exceeding the analyst consensus estimate of 87 cents [1]. - Quarterly sales reached $1.521 billion, reflecting a 4% year-over-year increase, surpassing the street view of $1.492 billion [1]. Group 2: Market Conditions and Risks - The industry has long-term growth potential, but current conditions create uncertainty, with limited visibility beyond the near term [2]. - Goldman expresses doubts about whether demand will grow sufficiently to match supply in the coming years, despite the company's plans to adjust prices to regain market share [3]. - Forecasting Lamb Weston's performance beyond the upcoming quarter is challenging due to uncertainties surrounding fiscal year 2026 [4]. Group 3: Potential Upside Factors - Potential positive factors include new customer contracts, lower potato input costs in North America, greater-than-expected cost savings, and increased share repurchases [4]. - Fiscal year 2026 will include an extra week, which could positively impact results [4]. Group 4: Additional Risks - Ongoing pricing initiatives to win business may not guarantee cost deflation [5]. - Persistent challenges in the quick-service restaurant sector and a possible rise in overall fry supply are noted as risks [5]. - Uncertainties related to tariffs also pose potential risks [5].

Group 1 - Lamb Weston reported revenue of $1.52 billion, exceeding expectations by 1.8% compared to the anticipated $1.49 billion, and earnings per share (EPS) of $1.10, which is 26.6% higher than the consensus estimate of 88 cents per share [2] - The company maintained its revenue and earnings guidance for the remainder of its 2025 fiscal year, projecting $6.4 billion in revenue at the midpoint and EPS guidance of $3.13, consistent with its average since 2019 [2] - The operating margin improved to 16.4% from 15.4% in the previous quarter, indicating a positive trend despite a year-over-year decline [3] Group 2 - Lamb Weston successfully replaced the customer volume lost during its transition to a new Enterprise Resource Planning (ERP) system, which had previously resulted in a significant loss of customers [4] - The company is nearing completion of crop negotiations for the upcoming fiscal year, expecting a mid-single-digit price decline for North American crops, while international crop prices are projected to remain flat year-over-year [5] - Capital spending increased to 15.3% of net sales in 2024, primarily due to the ERP implementation, but a forecasted reduction of $450 million in CapEx spending is expected by the end of fiscal year 2026 compared to 2024 [6] Group 3 - Despite maintaining its outlook, Lamb Weston faces challenges with persistent softness in restaurant traffic, particularly affecting sales to major customer McDonald's due to inflationary pressures [7] - The company may benefit from potential tariff impacts, as it could lead to a shift in suppliers from competitors like McCain Foods to Lamb Weston, which has expanded its production capacity since 2020 [10]

Financial Data and Key Metrics Changes - In Q3 2025, net sales increased by 4% year-over-year, with volume growth of 9% primarily due to recovering from the previous year's ERP transition and new customer contracts [26][12] - Adjusted EBITDA grew by 6% to $364 million, driven by higher sales volumes and lower manufacturing costs [31][32] - Price mix declined by 5% compared to the prior year due to competitive pricing strategies [27][28] Business Line Data and Key Metrics Changes - North America net sales grew by 4%, with volume improving by 8%, although offset by soft restaurant traffic trends [27][28] - International segment sales increased by 5%, with volume up by 12%, despite weak restaurant traffic in key markets [30] - Adjusted EBITDA for North America increased by $15 million to $301 million, while the international segment saw a decline of $8.5 million to $93 million [34] Market Data and Key Metrics Changes - QSR traffic in North America declined by 2%, with hamburger chains experiencing a 6% drop in February [28][29] - The company anticipates a mid-single-digit percent decline in potato prices for the 2025 crop in North America, with flat prices expected in Europe [19][20] Company Strategy and Development Direction - The company is focusing on a value creation plan with the help of Alex Partners to optimize operations and drive growth [9][10] - A restructuring plan is in place to achieve at least $55 million in pre-tax savings for fiscal 2025 [12][51] - The company aims to enhance customer relationships and innovate product offerings to meet evolving market demands [16][17] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the challenging macroeconomic environment and consumer uncertainty, which is impacting restaurant traffic [13][18] - The company expects continued pressure on pricing and margins due to competitive dynamics and inflationary costs [44][45] - Despite these challenges, management remains optimistic about long-term growth opportunities through customer engagement and operational efficiencies [53][54] Other Important Information - The company ended Q3 with approximately $1.1 billion in liquidity and a net debt of $4.2 billion, maintaining a leverage ratio of 3.4 times [35][36] - Capital expenditures for the year are projected to be $750 million, down from the previous year [38] Q&A Session Summary Question: Impact of crop prices on QSR contract negotiations - Management indicated that customer contract negotiations will begin in the summer, and while potato prices are expected to decline, other inflationary costs will also impact negotiations [57][58] Question: Opportunities with Alex Partners - The focus is on cost savings, productivity, and a data-driven approach to identify growth opportunities across the P&L [61][63] Question: Gross margin expectations for Q4 - Management explained that higher fixed cost absorption and other input costs will pressure gross margins, with a forecasted decline of around 700 basis points [69][71] Question: Connell plant future plans - The company has decided not to sell the Connell plant and is conducting a strategic review of other options [100][101] Question: Weakness in QSR traffic - Management attributed the decline in QSR traffic to macroeconomic uncertainty and is monitoring demand signals closely [108][109] Question: Changes in QSR operations and competitive threats - The company is adjusting contract schedules and is open to new ideas as customers seek to drive traffic to their restaurants [138][139]

Core Insights - Lamb Weston Holdings, Inc. reported third-quarter fiscal 2025 results with earnings per share (EPS) of $1.10, exceeding the Zacks Consensus Estimate of 87 cents, despite an 8% year-over-year decline in EPS due to increased tax rates and interest expenses [2][4] - Net sales reached $1,520.5 million, surpassing the Zacks Consensus Estimate of $1,500.1 million, marking a 4% increase year over year [3][4] Financial Performance - Adjusted gross profit decreased by $6.6 million to $420.4 million, influenced by a negative price/mix, increased transportation and warehousing costs, and higher depreciation expenses [7] - Adjusted selling, general and administrative (SG&A) expenses fell by $7.2 million to $157.2 million, benefiting from cost savings initiatives [8] - Adjusted EBITDA rose by $20.2 million year over year to $363.8 million, driven by increased net sales and reduced SG&A expenses [9] Volume and Sales Trends - Volume increased by 9% compared to the same quarter last year, successfully replacing lost volume from regional and retail customers [5] - North America segment net sales grew by 4% to $986.3 million, with an 8% rise in sales volume [10] - International segment net sales increased by 5% to $534.2 million, with a 12% rise in volume despite weak restaurant traffic [11] Strategic Initiatives - The company is implementing a Restructuring Plan to achieve cost savings while addressing challenges from soft restaurant traffic [4] - Lamb Weston is collaborating with AlixPartners to evaluate opportunities for value creation and cost savings [4] Shareholder Returns - The company returned $151.4 million to shareholders through cash dividends and share repurchases, including $51.4 million in cash dividends and $100 million in share repurchases [14] - A quarterly dividend of 37 cents per share was declared, payable on May 30, 2025 [15] Future Outlook - The company maintains its fiscal 2025 net sales target range of $6.35-$6.45 billion and adjusted EBITDA target range of $1.17 billion to $1.21 billion [17] - Adjusted SG&A expenses are now expected to be between $665 million and $675 million, down from previous estimates [18]

Lamb Weston Fiscal Q3 2025 Earnings April 3, 2025 Lamb Weston, Inc. Proprietary 1 | © 2025 Lamb Weston. All Rights Reserved. Forward-looking Statements Important Notice This presentation contains forward-looking statements within the meaning of the federal securities laws. Words such as "expect," "will," "continue," "win," "reduce," "drive," "focus," "increase," "estimate," "outlook," "target," "deliver," "invest," "support," "remain," "achieve," and variations of such words and similar expressions are inte ...

Financial Performance - Net sales for the third quarter of fiscal 2025 increased by $62.2 million, or 4%, to $1,520.5 million, with volume increasing by 9% compared to the prior year quarter [89]. - North America segment net sales rose by $38.8 million, or 4%, to $986.3 million, with volume increasing by 8% due to recent customer contract wins [91]. - International segment net sales increased by $23.4 million, or 5%, to $534.2 million, with volume up by 12% driven by chain customer contract wins [92]. - Net income decreased by $0.1 million to $146.0 million, impacted by a total net loss of $10.6 million from various unrealized gains and losses [97]. - Net sales for the first three quarters of fiscal 2025 declined by $80.2 million, or 2%, to $4,775.5 million [105]. - North America segment net sales decreased by $87.9 million, or 3%, to $3,162.1 million, primarily due to customer volume losses [107]. - Net income for the thirty-nine weeks ended February 23, 2025, was $237.3 million, compared to $595.8 million for the same period in the prior year [137]. Profitability - Adjusted Gross Profit declined by $6.6 million to $420.4 million, primarily due to unfavorable price/mix and higher transportation costs [94]. - Adjusted Gross Profit declined by $278.7 million to $1,117.0 million, influenced by higher manufacturing and transportation costs [110]. - Adjusted EBITDA increased by $20.2 million to $363.8 million, driven by higher net sales and lower Adjusted SG&A, despite lower Adjusted Gross Profit [98]. - Adjusted EBITDA for the thirty-nine weeks ended February 23, 2025, was $935.6 million, down from $1,133.4 million in the prior year [137]. - Adjusted gross profit for the thirty-nine weeks ended February 23, 2025, was $1,117.0 million, down from $1,395.7 million in the prior year, indicating a decrease of 20% [140]. Expenses and Cost Management - SG&A expenses decreased by $15.6 million to $164.2 million, including various unrealized gains and losses related to currency hedging [95]. - Adjusted SG&A declined by $7.2 million year-over-year to $157.2 million, primarily due to cost savings from the Restructuring Plan and management initiatives [96]. - Interest expense increased by $11.6 million to $47.3 million, reflecting higher total debt and lower capitalized interest [101]. - The company incurred restructuring plan expenses of $76.2 million for the thirty-nine weeks ended February 23, 2025, compared to $84.2 million in the same period of 2024 [140]. Restructuring and Future Outlook - The Restructuring Plan is expected to generate approximately $55 million in pre-tax cost savings and reduce working capital in fiscal 2025 [86]. - Total pre-tax charges related to the Restructuring Plan are estimated to be between $190 million and $210 million [86]. - The company expects sales volumes in the fourth quarter to be slightly higher than in the third quarter, primarily due to growth in the International segment [82]. - The company anticipates an increase in costs per pound in the fourth quarter, reflecting seasonal trends and high input costs [82]. - The company recorded an estimated $135 million impact on net sales due to the ERP transition, with a net income impact of approximately $95 million [137]. Cash Flow and Capital Management - Cash provided by operating activities increased by $3.8 million to $485.3 million for the first three quarters of fiscal 2025, primarily due to $274.0 million in favorable changes in working capital [126]. - Investing activities used $559.0 million in cash during the first three quarters of fiscal 2025, a decrease from $824.8 million in the same period of the prior year, mainly for expanding french fry capacity and facility modernization [127]. - The company decreased its estimated capital expenditures for fiscal 2025 by $100 million to $750 million, excluding acquisitions, due to a pause in the next phase of its ERP build [129]. - During the first three quarters of fiscal 2025, the company borrowed $162.2 million under its revolving credit facility and $525.3 million under new long-term debt facilities [130]. - The company repurchased 2,972,221 shares of common stock at an average price of $61.23 per share, totaling $193.8 million, and paid $154.7 million in cash dividends to common stockholders [130]. Market Risks and Compliance - The company is evaluating the impact of new tariffs but does not expect them to significantly affect fiscal 2025 financial results [83]. - The company remains in compliance with financial covenant ratios and other covenants contained in its debt agreements as of February 23, 2025 [132]. - The company continues to monitor and manage market risks related to currency exchange rates, commodity prices, and interest rates as part of its risk management program [145]. - No material changes to market risk were reported during the thirty-nine weeks ended February 23, 2025 [146].

Core Viewpoint - Lamb Weston reported quarterly earnings of $1.10 per share, exceeding the Zacks Consensus Estimate of $0.87 per share, but down from $1.20 per share a year ago, indicating a 26.44% earnings surprise [1] Financial Performance - The company posted revenues of $1.52 billion for the quarter ended February 2025, surpassing the Zacks Consensus Estimate by 1.36% and showing an increase from $1.46 billion year-over-year [2] - Over the last four quarters, Lamb Weston has exceeded consensus EPS estimates only once [2] Stock Performance - Lamb Weston shares have declined approximately 19% since the beginning of the year, compared to a 3.6% decline in the S&P 500 [3] - The current Zacks Rank for Lamb Weston is 4 (Sell), indicating expected underperformance in the near future [6] Earnings Outlook - The consensus EPS estimate for the upcoming quarter is $0.83 on revenues of $1.61 billion, and for the current fiscal year, it is $3.09 on revenues of $6.37 billion [7] - The trend for estimate revisions ahead of the earnings release was unfavorable, which may impact future stock performance [6] Industry Context - The Food - Miscellaneous industry, to which Lamb Weston belongs, is currently ranked in the bottom 21% of over 250 Zacks industries, suggesting potential challenges for stock performance [8] - Another company in the same industry, Post Holdings, is expected to report quarterly earnings of $1.19 per share, reflecting a year-over-year decline of 21.2% [9]

Financial Performance - Net sales for Q3 FY 2025 increased by 4% to $1,520.5 million compared to the prior year quarter[4] - Income from operations rose by 11% to $248.7 million, while net income remained flat at $146.0 million[4] - Adjusted EBITDA increased by 6% to $363.8 million, driven by higher net sales and lower adjusted SG&A[4] - Adjusted net income for Q3 FY 2025 declined by 11% to $156.6 million, with adjusted diluted EPS down 8% to $1.10[4] - For the thirteen weeks ended February 23, 2025, net sales were $1,520.5 million, compared to $1,458.3 million for the same period in 2024, reflecting a growth of 4.3%[32] - The company reported a net income of $146.0 million for the thirteen weeks ended February 23, 2025, compared to $146.1 million for the same period in 2024[32] - The company reported a net income of $237.3 million for the thirty-nine weeks ended February 23, 2025, compared to $595.8 million for the same period in 2024[39] - The company reported total revenue of $1,056.3 million for the thirty-nine weeks ended February 23, 2025, a decrease from $1,378.8 million in the same period of the previous year[47] Sales and Segments - The North America segment reported net sales of $986.3 million, up 4%, with volume increasing by 8%[11] - The International segment's net sales increased by 5% to $534.2 million, with volume up 12% despite soft restaurant traffic[12] - North America segment net sales for the thirty-nine weeks ended February 23, 2025, were $3,162.1 million, a 3% decrease from $3,250.0 million in the prior year[41] Future Projections - The company expects net sales for FY 2025 to be between $6.35 billion and $6.45 billion, with an adjusted EBITDA target of $1.17 billion to $1.21 billion[4] - Net sales target range for fiscal 2025 is projected between $6.35 billion and $6.45 billion[24] - Adjusted EBITDA target range is estimated to be between $1.17 billion and $1.21 billion[24] - Adjusted Net Income is expected to be in the range of $440 million to $460 million, with Adjusted Diluted EPS projected at $3.05 to $3.20[24] Capital Expenditures and Shareholder Returns - Capital expenditures for the first three quarters of FY 2025 were $563.1 million, down $250.7 million from the prior year period[14] - The company returned $151.4 million to shareholders in Q3 FY 2025, including $51.4 million in cash dividends and $100.0 million in share repurchases[16] - Cash used for capital expenditures is projected to be around $750 million, with potential adjustments based on the timing of cash payments for the Argentina expansion[24] - Dividends declared per common share increased to $0.37 for the thirteen weeks ended February 23, 2025, up from $0.36 in the prior year[32] Restructuring and Operational Efficiency - The company incurred a restructuring expense of $9.6 million for the thirteen weeks ended February 23, 2025, and $84.2 million for the thirty-nine weeks ended February 23, 2025[32] - The Company announced a Restructuring Plan on October 1, 2024, details of which are available in the Quarterly Report[4] - The Company’s restructuring efforts are aimed at improving operational efficiency and financial performance moving forward[4] Currency and Other Adjustments - The company experienced foreign currency exchange losses of $17.2 million for the thirteen weeks ended February 23, 2025, compared to $21.8 million for the same period in 2024[8] - Foreign currency exchange losses for the thirty-nine weeks ended February 23, 2025, were $17.2 million, compared to $21.8 million for the same period in 2024[52] - The Company’s financial measures include adjustments for unrealized derivative gains and losses, foreign currency exchange gains and losses, and other items impacting comparability[7] - The company incurred a pre-tax charge of approximately $31 million related to a voluntary product withdrawal during the thirty-nine weeks ended February 23, 2025[42] Depreciation and Amortization - Depreciation and amortization for the thirteen weeks ended February 23, 2025, was $2.0 million, compared to $2.1 million for the same period in 2024[3] - Depreciation expense for the thirty-nine weeks ended February 23, 2025, was $6.1 million, compared to $6.4 million for the same period in 2024[3] - Accelerated depreciation related to the closure of the manufacturing facility in Connell, Washington, amounted to $4.5 million for the thirteen weeks ended February 23, 2025[3] Other Financial Metrics - The effective tax rate for the full year is estimated to be approximately 28%, excluding the impact of comparability items[24] - The total assets increased to $7,422.8 million as of February 23, 2025, up from $7,367.0 million on May 26, 2024[37] - The company incurred integration and acquisition-related expenses amounting to $11.2 million for the thirty-nine weeks ended February 25, 2024[8] - The company estimates that the ERP transition negatively impacted net sales by approximately $135 million, affecting both North America and International segments[8]

Core Insights - Lamb Weston Holdings, Inc. is set to release its third-quarter earnings results on April 3, with analysts expecting earnings of 87 cents per share, a decrease from $1.2 per share in the same quarter last year [1] - The company projects quarterly revenue of $1.49 billion, slightly up from $1.46 billion a year earlier [1] - A quarterly dividend of 37 cents per share was declared on March 20 [1] Stock Performance - Lamb Weston shares increased by 1.6%, closing at $54.15 on Wednesday [2] Analyst Ratings - Barclays analyst Lauren Lieberman maintains an Overweight rating, reducing the price target from $87 to $60 [5] - Stifel analyst Matthew Smith holds a Hold rating, lowering the price target from $80 to $68 [5] - Jefferies analyst Rob Dickerson keeps a Buy rating, raising the price target from $80 to $95 [5] - JP Morgan analyst Ken Goldman maintains a Neutral rating, increasing the price target from $68 to $78 [5] - Deutsche Bank analyst Steve Powers initiates coverage with a Hold rating and a price target of $81 [5]

Core Viewpoint - Lamb Weston Holdings, Inc. is expected to report a decline in its earnings for the third quarter of fiscal 2025, with a consensus estimate of 87 cents per share, reflecting a 27.5% decrease from the previous year [1] Financial Performance - The Zacks Consensus Estimate for Lamb Weston's quarterly revenues is projected at $1.50 billion, indicating a year-over-year growth of 2.9% [2] - Adjusted EBITDA is anticipated to reach $305.7 million, representing an 11% decline for the upcoming quarter [4] Challenges and Market Conditions - The company is facing challenges such as sluggish restaurant traffic, customer share losses, and overcapacity in the global market, which are negatively impacting volume performance [3] - Increased manufacturing costs due to input cost inflation, particularly in raw potato prices, along with higher transportation and warehousing expenses, are exerting additional pressure on the company [4] Strategic Initiatives - Despite the challenges, Lamb Weston is seeing positive outcomes from its Restructuring Plan aimed at improving efficiency and profitability [5] - The company is modernizing its manufacturing capabilities to optimize operations further, which is expected to have a favorable impact on the upcoming quarter [5] Earnings Expectations - The current model does not predict an earnings beat for Lamb Weston, with a Zacks Rank of 4 (Sell) and an Earnings ESP of -3.60% [6]