Key Takeaways NOMD saw 36% sales growth in 1Q in innovation-led categories and market share gains in Germany and the U.K. LW reported 9% volume growth in 3Q but faces margin pressure from weak pricing and higher inventory costs. NOMD's diversified product mix and price discipline contributed to its stronger performance versus peers.Nomad Foods Limited (NOMD) and Lamb Weston Holdings Inc. (LW) are leading forces in the global frozen foods sector, but they take markedly different approaches to growth, opera ...

Core Insights - The article discusses the author's investment strategy, focusing on medium-term investments with catalysts for value unlocking or short selling in case of downside catalysts [1] - The author has a generalist approach but has significant experience in analyzing the industrial, consumer, and technology sectors, where they typically have higher conviction [1] Investment Strategy - The strategy involves investing in growth stories that are available at reasonable prices [1] - The author emphasizes the importance of catalysts that can drive upside in investments [1] Experience and Background - The author has over 15 years of experience in investing, including providing research services to mid-sized hedge funds with assets under management between $100 million and $500 million [1] - A brief experience as a sell-side analyst is also noted, contributing to the author's comprehensive understanding of the market [1]

Core Viewpoint - Bragar Eagel & Squire, P.C. is investigating potential claims against Lamb Weston Holdings, Inc. due to a class action complaint alleging breaches of fiduciary duties by the board of directors during the implementation of a new ERP system [1] Company Overview - Lamb Weston is the largest producer of frozen potato products in North America and the second largest globally, supplying products to restaurants and retailers, including major customer McDonald's [2] ERP System Implementation - On July 25, 2023, Lamb Weston announced the completion of the design phase for a new Enterprise Resource Planning (ERP) software system aimed at integrating key business operations [3] - The new ERP system was intended to replace outdated financial and operational systems, which had suffered from years of under-investment in information technology [3] Allegations and Financial Impact - The class action complaint alleges that Lamb Weston made material misrepresentations regarding the ERP system's design and implementation, claiming it strengthened operational infrastructure while downplaying issues as "usual bumps" [4] - On April 4, 2024, Lamb Weston reported significant problems with the ERP transition, resulting in over $130 million in lost sales during the third quarter and a substantial reduction in sales guidance for the fiscal year [5] - The ERP rollout negatively impacted net sales by $135 million, net income by $72 million, and adjusted EBITDA by $95 million, leading to a stock price decline of over 19% [5]

Technical Analysis - Lamb Weston (LW) has reached an important support level and surpassed resistance at the 20-day moving average, indicating a short-term bullish trend [1] - The 20-day simple moving average is a useful tool for short-term traders as it smooths out price trends and provides more trend reversal signals compared to longer-term moving averages [2] Stock Performance - Shares of LW have increased by 7.7% over the past four weeks, suggesting positive momentum [3] - The company currently holds a Zacks Rank 3 (Hold), indicating potential for continued gains [3] Earnings Estimates - There have been three upward revisions for LW's earnings estimates for the current fiscal year, with no downward revisions, leading to an increase in the consensus estimate [3] - The combination of positive earnings estimate revisions and technical indicators suggests that LW may experience further gains in the near future [4]

Technical Analysis - Lamb Weston (LW) has recently reached a key level of support and has overtaken the 50-day moving average, indicating a short-term bullish trend [1] - The 50-day simple moving average is a significant marker for traders and analysts to determine support or resistance levels [1] Performance Metrics - Over the past four weeks, LW has gained 7.7% [2] - The company currently holds a Zacks Rank 3 (Hold), suggesting potential for further stock price increases [2] Earnings Estimates - There have been positive earnings estimate revisions for LW, with no estimates decreasing in the past two months and three estimates increasing [2] - The consensus estimate for LW has also seen an increase, reinforcing the bullish outlook [2][3] Investment Outlook - Given the positive technical factors and earnings estimate revisions, LW may present a compelling investment opportunity for potential gains in the near future [3]

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 ...