Lamb Weston (LW) shares rallied 6.8% in the last trading session to close at $79.27. This move can be attributable to notable volume with a higher number of shares being traded than in a typical session. This compares to the stock's 7.7% loss over the past four weeks.Lamb Weston shares surged following reports that Post Holdings is exploring a potential deal with the Idaho based company. Apart from this, Lamb Weston has been benefiting from a favorable pricing environment and seeing strong results from its ...

Core Viewpoint - Lamb Weston Holdings, Inc. is expected to report a decline in both revenue and earnings for the second quarter of fiscal 2025, with revenue estimated at $1.7 billion, reflecting a 3.5% decrease year-over-year, and earnings per share projected at $1.05, indicating a 27.6% decline from the previous year [1] Group 1: Financial Performance Expectations - The Zacks Consensus Estimate for Lamb Weston’s revenues is $1.7 billion, suggesting a decline of 3.5% from the prior-year quarter [1] - The consensus estimate for earnings has decreased to $1.05 per share, indicating a decline of 27.6% from the year-ago quarter [1] - The company has a trailing four-quarter negative earnings surprise of almost 12% on average [1] Group 2: Operational Factors - Lamb Weston is benefiting from a strong pricing environment and positive results from its Restructuring Plan aimed at enhancing efficiency and profitability [3] - The company is modernizing its manufacturing capabilities to optimize operations and expand capacity to meet increasing demand [3] - Despite these efforts, Lamb Weston is facing lower volumes due to customer share losses and reduced restaurant traffic, with a predicted volume decline of 2.3% for the fiscal second quarter [4] Group 3: Earnings Prediction Insights - The current model does not predict an earnings beat for Lamb Weston, as it has a Zacks Rank of 4 (Sell) and an Earnings ESP of -5.71% [5][7] - The combination of a positive Earnings ESP and a Zacks Rank of 1, 2, or 3 typically increases the odds of an earnings beat, which is not applicable in this case [5]

Company Overview - Lamb Weston is a leading global producer and distributor of value-added frozen potato products, supplying restaurants and retailers worldwide [1] - The company ranks No. 1 in North America and No. 2 globally in the frozen potato market, benefiting from increased demand and high gross margins [4] Recent Performance - From FY17 to FY23, Lamb Weston achieved a 9% compound annual growth rate in net sales and a 10% CAGR in adjusted EBITDA, with adjusted gross margins improving by 340 basis points [6] - However, in 2024, prior to Jana Partners' involvement, the company's shares fell over 30%, contrasting with a 20% increase in the S&P 500 [6][7] Financial Challenges - In Q4 2024, Lamb Weston reported a 5% year-over-year decline in net sales and a 40% drop in adjusted EPS to 78 cents, significantly below the expected $1.26 per share [7] - The company attributed its poor performance to market share losses, reduced restaurant traffic due to inflation, and a voluntary product withdrawal [7] Capital Allocation and Operational Issues - Jana Partners has identified capital misallocation, operational blunders, and corporate governance failings as key issues for Lamb Weston [8] - The company has been spending nearly 14% of sales on capital expenditures in 2023, with projections of 12% to 13% for the next two years, raising concerns about the necessity and efficiency of this spending [8] - Lamb Weston has also seen an increase in selling, general, and administrative expenses as a percentage of net sales, which is viewed as suspicious given the revenue growth [8] Strategic Review and Board Changes - Jana Partners, in collaboration with Continental Grain, is seeking to engage with Lamb Weston on various topics, including financial performance, capital spending, and corporate governance [3] - Jana has proposed a slate of experienced industry executives for board positions to address operational and capital allocation issues [9] Potential for Strategic Transactions - There is speculation about a potential transaction involving Post Holdings, which could lead to a takeout offer exceeding $100 per share, contingent on the board's evaluation of shareholder value versus long-term operational plans [10]

Core Viewpoint - Lamb Weston reported a decline in both net sales and earnings for Q1 of fiscal 2025, with management cutting its profit outlook amid a slowdown in demand [2][3][9]. Financial Performance - The company's Q1 earnings per share (EPS) was 73 cents, matching estimates but down 55% year over year [3]. - Net sales reached $1,654.1 million, exceeding the Zacks Consensus Estimate of $1,555.2 million, but fell 1% year over year [4]. - Adjusted gross profit decreased by $137.2 million to $353.1 million, influenced by increased manufacturing costs and a $39 million loss from a product withdrawal [5]. Segment Analysis - 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 [6]. - International segment net sales increased 4% to $550.4 million, despite a 1% decline in volume, supported by growth in key markets outside Europe [7]. Financial Health - The company ended the quarter with cash and cash equivalents of $120.8 million and long-term debt of $3,437.3 million [8]. - Net cash from operating activities was $330.2 million, with capital expenditures of $335.6 million [8]. Future Outlook - Lamb Weston reaffirmed its fiscal 2025 net sales target of $6.6 billion to $6.8 billion, expecting growth of approximately 2% to 5% [9]. - Adjusted net income target range was lowered to $600-$615 million, with adjusted EPS revised to $4.15-$4.35 [9]. - The company anticipates an interest expense of around $185 million and an effective tax rate of about 25% for the full year [9]. Estimate Trends - There has been a downward trend in estimates, with the consensus estimate shifting down by 10.85% [10][12]. - Lamb Weston currently holds a Zacks Rank 3 (Hold), indicating expectations for an in-line return in the coming months [12]. Investment Scores - The company has a Growth Score of B and a Value Score of A, resulting in an aggregate VGM Score of B [11].

Group 1 - The focus is on GARP (Growth at Reasonable Price) opportunities within the industrial, consumer, and technology sectors [1] - The article encourages readers to follow for the latest research updates and invites questions through comments or messaging [1] Group 2 - There is a mention of a previous contributor, ABI Invest, who is now contributing under a separate profile [1]

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]