Join iREIT on Alpha today to get the most in-depth research that includes REITs, mREITs, Preferreds, BDCs, MLPs, ETFs, and other income alternatives. 438 testimonials and most are 5 stars. Nothing to lose with our FREE 2-week trial .This year, I started covering Lamb Weston Holdings (NYSE: LW ) . My first article on the company was published on April 6. Back then, the stock had sold off after reporting poor earnings, pressured by weakening consumer demand and massive issues with itsAnalyst’s Disclosure: I/w ...

Jana Partners took a stake in the struggling potato company. Shares of Lamb Weston (LW 9.63%), one of the world's largest producers of frozen potatoes, were moving higher today on news that an activist investor had taken a stake in the struggling food stock. As of 11:19 a.m. ET, the stock was up 9.9% on the news. Jana sees an opportunity According to a report in The Wall Street Journal, Jana Partners has accumulated a roughly 5% stake in Lamb Weston with the intention of pushing the company to consider a sa ...

Core Viewpoint - Investors reacted positively to Lamb Weston's restructuring program, which overshadowed the mixed results of its first-quarter earnings report [2][5]. Financial Performance - For the fiscal first quarter of 2025, Lamb Weston reported net sales of slightly over $1.65 billion, a 1% decline year over year [3]. - The company's adjusted net income fell by 56% to $105 million, translating to $0.73 per share, although it exceeded the consensus estimate of $0.72 per share [3][4]. - The company outperformed expectations on net sales, which were forecasted at $1.55 billion [4]. Market Conditions - Demand for frozen potato products remained weak, influenced by reduced restaurant traffic, which negatively impacted the quarter's results [4]. Restructuring Program - Lamb Weston announced a restructuring program that includes the permanent closure of an older, costly processing facility and temporary reductions in production lines and schedules [5]. - The CEO stated that these actions aim to improve factory utilization rates and address the supply-demand imbalance in North America [6]. - The company adjusted its forecast for adjusted net income to between $600 million and $615 million ($4.15 to $4.35 per share) while reaffirming its net sales outlook of $6.6 billion to $6.8 billion [6].

Financial Data and Key Metrics Changes - Sales for Q1 2025 declined by 1% compared to the previous year, which was better than the expected high single-digit decline due to better volume and price mix [14] - Adjusted EBITDA for the quarter was $290 million, down $123 million from the prior year, primarily due to higher manufacturing costs and the impact of a voluntary product withdrawal [17][28] - Gross margin was nearly 21.5%, about 100 to 150 basis points below the target of 22% to 23% [16] Business Line Data and Key Metrics Changes - North America segment sales declined by 3%, with volume down 4% due to customer share losses and declining restaurant traffic [18] - International segment sales increased by 4%, with price mix up by 5%, but volume declined by 1% due to strategic exits from lower-margin businesses [19][20] Market Data and Key Metrics Changes - U.S. restaurant traffic was down 2% year-over-year, showing a slight improvement from a 3% decline in the previous quarter [5] - In key international markets, restaurant traffic trends were softer, with the U.K. and Germany both seeing a 3% decline [6] Company Strategy and Development Direction - The company announced a restructuring plan aimed at improving operational efficiency, which includes closing a high-cost facility and reducing global headcount by approximately 4% [10][23] - The company expects to generate approximately $55 million in savings from the restructuring plan in fiscal 2025, with further benefits anticipated in fiscal 2026 [24] Management's Comments on Operating Environment and Future Outlook - Management expressed a cautious view on frozen potato demand and global restaurant traffic for the remainder of fiscal 2025, despite some improvements in restaurant traffic trends [4][13] - The company anticipates that the supply-demand imbalance will persist through much of fiscal 2025 [7] Other Important Information - The company expects capital expenditures for fiscal 2025 to be approximately $750 million, down from previous estimates due to deferrals in ERP system implementation and modernization projects [25] - The company plans to spend approximately $150 million on environmental capital projects over the next five years to comply with regulations [27] Q&A Session All Questions and Answers Question: Pricing dynamics in North America - Management indicated that the pricing environment was in line with expectations, with a better mix and carryover from last year contributing positively [33] Question: Capacity reduction moves in the industry - Management noted that they have made tough decisions based on the current operating environment, but they do not have insights into competitors' actions [35] Question: Environmental capital expenditures - Management explained that the $500 million is primarily for wastewater capital investments needed at manufacturing plants [37] Question: Impact of ERP implementation delay - Management confirmed that delaying the ERP implementation will postpone the benefits but does not foresee a major impact on future guidance [40] Question: Gross margin expectations - Management acknowledged that higher manufacturing costs and fixed cost deleveraging would impact gross margins, but they expect improvements as volume increases [42] Question: Share regain progression - Management is confident in winning back customers, with significant business wins expected in the latter half of the fiscal year [62]

Core Insights - Lamb Weston Holdings, Inc. reported a decline in both net sales and earnings for the first quarter of fiscal 2025, with net sales exceeding estimates while earnings met expectations [1][2][3] Financial Performance - Quarterly net sales reached $1,654.1 million, surpassing the Zacks Consensus Estimate of $1,555.2 million, but fell 1% year over year [3] - Earnings per share (EPS) was 73 cents, aligning with estimates but down 55% year over year due to lower adjusted income from operations, higher effective tax rates, and increased interest expenses [2][3] - Adjusted gross profit decreased by $137.2 million to $353.1 million, impacted by increased manufacturing costs, a $39 million loss from a product withdrawal, and lower sales volumes [7] - Adjusted EBITDA fell by $122.9 million to $289.9 million, primarily due to lower sales and a decline in adjusted gross profit [8] Segment Performance - North America segment net sales dropped 3% to $1,103.7 million, with a 4% decline in volume attributed to customer share losses and reduced restaurant traffic [9][10] - International segment net sales increased 4% to $550.4 million, despite a 1% decline in volume, supported by growth in key international markets [10][11] Restructuring Plan - The company announced a restructuring plan aimed at enhancing operational efficiency and profitability, which includes the closure of a manufacturing facility and a 4% reduction in the global workforce [4][14] - The restructuring is expected to generate approximately $55 million in pretax cost savings and reduce capital expenditures for fiscal 2025 by $100 million [14] Future Outlook - The company reaffirmed its fiscal 2025 net sales target of $6.6 billion to $6.8 billion, projecting growth of approximately 2% to 5% on a constant currency basis [15] - Adjusted net income target range was lowered to $600-$615 million and adjusted EPS to $4.15-$4.35, reflecting reduced adjusted EBITDA guidance [18] - Anticipated interest expense is around $185 million, with an effective tax rate of about 25% [19]

Group 1: Earnings Performance - Lamb Weston reported quarterly earnings of $0.73 per share, matching the Zacks Consensus Estimate, but down from $1.63 per share a year ago [1] - The company had a revenue of $1.65 billion for the quarter ended August 2024, exceeding the Zacks Consensus Estimate by 6.36%, but down from $1.67 billion year-over-year [2] - Over the last four quarters, Lamb Weston has surpassed consensus EPS estimates only once [1] Group 2: Stock Performance and Outlook - Lamb Weston shares have declined approximately 40.1% since the beginning of the year, contrasting with the S&P 500's gain of 20.8% [3] - The current consensus EPS estimate for the upcoming quarter is $1.20 on revenues of $1.67 billion, and for the current fiscal year, it is $4.54 on revenues of $6.61 billion [7] - The estimate revisions trend for Lamb Weston is currently unfavorable, resulting in a Zacks Rank 5 (Strong Sell) for the stock, indicating expected underperformance in the near future [6] Group 3: Industry Context - The Food - Miscellaneous industry, to which Lamb Weston belongs, is currently in the top 41% of over 250 Zacks industries, suggesting a favorable industry outlook [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5]

Lamb Weston Holdings, Inc. (LW) is likely to register a top-and-bottom-line decline when it reports firstquarter fiscal 2025 earnings on Oct. 1, 2024. The Zacks Consensus Estimate for revenues is pegged at $1.56 billion, suggesting a decrease of 6.6% from the prior-year quarter's reported figure. The Zacks Consensus Estimate for the bottom line has remained unchanged in the past 30 days at 73 cents per share. The projection indicates a decline of 55.2% from the figure reported in the year-ago period. LW has ...

Company Overview - Lamb Weston (NYSE: LW) is a consumer-staples company that specializes in the production of frozen potato products [1] - The company operates 27 factories and distributes its products in over 100 countries [1] - Lamb Weston holds the 1 market share in North America and 2 in other regions [1] Leadership and Background - The founder of Building Benjamins, Benjamin Halliburton, has a long history in investment management, starting his career at Merrill Lynch in 1986 [1] - Halliburton has been recognized for his investment performance, including being named "PSN Manager of the Decade" for both All-Cap and Dividend Value categories in different decades [1] - He earned an MBA with a focus on finance from Duke's Fuqua School of Business and holds the Chartered Financial Analyst designation [1]

Core Insights - Lamb Weston Holdings, Inc. is facing fundamental challenges impacting its performance, including difficulties in commercial execution, supply chain operations, and a global decline in demand for frozen fries [1] - The company anticipates another difficult year in fiscal 2025, with a projected year-over-year decline in sales of 6.6% and earnings of 55.2% [2] Performance Overview - Year-to-date, Lamb Weston has experienced disappointing stock market performance, with a stock price decline of 41.7%, underperforming the Zacks Food - Miscellaneous industry's growth of 4.4% and the broader Consumer Staples sector's increase of 10% [3] Volume-Related Concerns - In the fourth quarter of fiscal 2024, Lamb Weston saw an 8% decline in volume, attributed to market share losses and a strategic exit from lower-priced, lower-margin businesses in Europe [5] - Weak restaurant traffic trends in North America and other international markets contributed to approximately 25% of this volume decline [5] - For the first half of fiscal 2025, the company projects a low-to-mid single-digit volume decline compared to the previous year [6] Cost Pressures - The adjusted gross profit for Lamb Weston dropped by $72.2 million to $363 million in the fourth quarter of fiscal 2024, primarily due to losses from product withdrawals and lower sales volumes [7] - The company is facing high manufacturing costs due to inflation in raw potatoes, labor, and ingredients, along with increased transportation and warehouse expenses [7] - Input cost inflation is expected to persist, influenced by a potentially below-average potato crop in Europe [8] Future Outlook - Lamb Weston anticipates a challenging operating environment in fiscal 2025, characterized by softened global restaurant traffic and reduced demand for frozen potatoes [8] - The company projects a mid- to high single-digit decline in sales for the first quarter of fiscal 2025, reflecting ongoing market share losses and weak restaurant traffic [8] - Margin pressure is expected to be intensified by higher costs per pound, an unfavorable product mix, and increased investments in pricing and trade support [8] Investor Sentiment - Analysts' negative sentiment is reflected in the Zacks Rank 5 (Strong Sell) for Lamb Weston, indicating expectations of further deterioration in the company's financial performance [9]

Company Overview - Lamb Weston Holdings Inc. is a leading American food company specializing in frozen potato products, with a market cap of $9 billion [1] - The company operates in two segments: North America (67% of FY 2024 revenue) and International (33%) [1] - McDonald's Corp. is the largest customer, accounting for 14% of total net sales [1] Dividend Growth - The company has increased its dividend for eight consecutive years since becoming independent in 2017 [2] - The five-year dividend growth rate is 7.9%, with a recent increase of 28.6% [3] - The current stock yield is 2.3%, which is 110 basis points higher than its five-year average, and the payout ratio is 28.9% [3] Revenue and Earnings Growth - Revenue grew from $3.2 billion in FY 2017 to $6.5 billion in FY 2024, representing a compound annual growth rate (CAGR) of 10.7% [4] - Earnings per share (EPS) increased from $2.22 to $4.98 during the same period, with a CAGR of 12.2% [5] - Recent challenges include a botched ERP transition and excess supply in the market, leading to a significant drop in stock price [5] Financial Position - The long-term debt/equity ratio is 1.9, and the interest coverage ratio is nearly 8, indicating a decent financial position [6] - Return on equity (ROE) averaged 269% over the last five years, with a net margin of 10.8% [6] - The company benefits from economies of scale and strong customer relationships, providing durable competitive advantages [6] Valuation - The stock is currently trading at a P/E ratio of 12.4, significantly lower than its five-year average of 23.4 [7] - A dividend discount model analysis estimates a fair value of $61.92, indicating the stock may be undervalued [11] - Professional analysis firms rate the stock as a 4-star "buy," with target prices of $70.00 and $95.00 from CFRA and Morningstar, respectively [13][14] Investment Opportunity - The recent stock price drop of nearly 50% presents a potential buying opportunity for long-term investors [5][15] - The company has a low payout ratio and a history of dividend increases, making it an attractive option for dividend growth investors [15]