Core Viewpoint - Lamb Weston Holdings, Inc. is facing significant challenges in the frozen potato industry, leading to a weaker-than-expected performance in its second-quarter fiscal 2025 and a lowered financial outlook for the remainder of the fiscal year [1][10]. Group 1: Market Challenges - The company is experiencing a decline in global restaurant traffic, increased competition, overcapacity in the market, and rising manufacturing costs [3][10]. - Lamb Weston reported a 6% decline in quarterly volume due to weak global restaurant traffic and customer share losses, with North America segment volume falling by 5% and International segment volume dropping by 6% [7]. - The company's price/mix decreased by 2% due to competitive pressures and unfavorable channel and product mix [4]. Group 2: Financial Performance - In the second quarter of fiscal 2025, Lamb Weston’s adjusted gross profit decreased by $134.9 million to $343.5 million, attributed to increased manufacturing costs, unfavorable price/mix, and reduced sales volumes [8]. - The company has revised its annual net sales target range to $6.35-$6.45 billion, down from $6.6 billion to $6.8 billion, reflecting heightened competitive pressures and challenges in both International and North America segments [11]. - Adjusted net income guidance has been lowered to $440-$460 million, with adjusted earnings per share revised to $3.05 to $3.20, down from previous estimates of $600 million to $615 million and $4.15 to $4.35, respectively [11]. Group 3: Future Outlook - Lamb Weston anticipates that challenging conditions will persist through fiscal 2025 and into fiscal 2026, driven by continued softening in global frozen potato demand and accelerated capacity additions [10]. - The company is implementing a restructuring plan to improve operating efficiency and profitability, but faces an uncertain future due to weak demand and rising costs [15].

Core Insights - The performance of Lamb Weston (LW) in international markets is crucial for assessing its financial resilience and growth prospects [2][3] - The company's total revenue for the quarter was $1.6 billion, a decrease of 7.6% from the previous year [4] Revenue Breakdown - North America contributed 66.97% of total revenue, amounting to $1.07 billion, which was a surprise decrease of 3.25% compared to analyst expectations [5] - International revenue was $528.8 million, accounting for 33.03% of total revenue, also below expectations by 6.49% [6] Future Projections - Analysts expect total revenue for the current fiscal quarter to be $1.55 billion, reflecting a 6.1% increase from the previous year, with North America and International expected to contribute 66.8% and 36.9% respectively [7] - For the full year, total revenue is projected at $6.49 billion, a slight increase of 0.3% from the prior year, with North America and International expected to account for 68.2% and 34.4% respectively [8] Conclusion - Lamb Weston's reliance on international markets presents both opportunities and risks, making it essential to monitor international revenue trends for future forecasts [9][10]

Group 1 - The fundamental outlook for Lamb Weston Holdings (NYSE: LW) is considered poor, with no immediate catalysts to improve stock sentiment [1] - The investment approach emphasizes value investing principles and a focus on long-term growth, aiming to buy quality companies at a discount to their intrinsic value [1]

Group 1 - The investing group Ian's Insider Corner offers features such as a Weekend Digest, trade alerts, and direct access to Ian [1] - Ian Bezek, a former hedge fund analyst, specializes in high-quality compounders and growth stocks at reasonable prices, focusing on markets in Latin America and developed markets [4] Group 2 - Membership in Ian's Insider Corner includes access to initiation reports for new stocks, an active chat room, and weekly updates [3]

Financial Performance - For the thirteen weeks ended November 24, 2024, the net income was a loss of $36.1 million, compared to a net income of $215.0 million for the same period in the previous year[47]. - Adjusted EBITDA for the thirteen weeks ended November 24, 2024, was $281.9 million, down from $376.9 million in the prior year[47]. - Restructuring plan expenses amounted to $159.1 million for the thirteen weeks ended November 24, 2024[47]. - Interest expense for the thirteen weeks ended November 24, 2024, was $43.3 million, compared to $29.1 million for the same period in the previous year[47]. - The company recorded approximately $39 million related to a voluntary product withdrawal during the twenty-six weeks ended November 24, 2024[49]. - The company reported unrealized derivative losses of $3.0 million for the thirteen weeks ended November 24, 2024[47]. - Foreign currency exchange losses were $9.6 million for the thirteen weeks ended November 24, 2024[47]. Debt and Financing - The company entered into a new $500 million term loan facility, using $225 million to repay the Term A-1 loan and $275 million for the revolving credit facility[42]. - At November 24, 2024, the company had $2,990.9 million of fixed-rate and $1,106.8 million of variable-rate debt outstanding[61]. - A one percent increase in interest rates related to variable-rate debt would have resulted in an increase in interest expense of $11.2 million annually ($8.6 million after-tax) at November 24, 2024[61]. - At May 26, 2024, the company had $2,495.0 million of fixed-rate and $1,341.7 million of variable-rate debt outstanding[61]. - A one percent increase in interest rates related to variable-rate debt would have resulted in an increase in interest expense of $13.6 million annually ($10.6 million after-tax) at May 26, 2024[61]. Market Sensitivity - A hypothetical 10 percent decline in market prices would have resulted in a charge to "Cost of sales" of $8.8 million ($6.6 million after-tax) as of November 24, 2024[58]. - A hypothetical 10 percent adverse change in exchange rates versus the U.S. dollar would result in losses of $73.9 million ($56.2 million after-tax) as of November 24, 2024[60]. - A hypothetical 10 percent decline in market prices would have resulted in a charge to "Cost of sales" of $9.2 million ($6.9 million after-tax) as of May 26, 2024[58]. - A hypothetical 10 percent adverse change in exchange rates would result in losses of $63.3 million ($48.1 million after-tax) as of May 26, 2024[60]. Accounting and Reporting - The company has not reported any material changes to off-balance sheet arrangements[54]. - There were no material changes to critical accounting policies and estimates during the second quarter of fiscal 2025[55].

Shares of Lamb Weston (LW -21.70%) -- North America's largest potato producer -- were sliding again after it delivered third-quarter results before the start of Thursday trading that missed estimates, offered weak guidance, and said it was replacing its CEO.As of 11:37 a.m. ET, the stock was down 21.2% on the news. Lamb Weston's problems are multiplyingLamb Weston's revenue in the quarter fell by 8% year over year to $1.6 billion, which missed the consensus estimate of $1.67 billion. The underperformance ca ...

Financial Data and Key Metrics - Net sales declined by 8% compared to the prior year quarter, with volume declining 6% and price-mix declining 2% [12][13] - Adjusted EBITDA fell by $95 million to $282 million, primarily due to a $135 million decline in adjusted gross profit [19] - North America segment sales declined by 8%, with volume down 5% and price-mix down 3% [15][17] - International segment sales declined by 6%, with volume down 6% and price-mix flat [17][18] - The company ended the quarter with $80 million in cash and $1.2 billion available under its revolving credit facility, with net debt at $4 billion and a leverage ratio of 3.4x [23][24] Business Line Performance - North America segment faced volume declines due to reduced restaurant traffic and customer share losses, particularly in food-away-from-home channels [15] - International segment experienced volume declines due to softening restaurant traffic in key markets like Germany, France, and Spain, as well as competitive pressures in the Middle East and Asia Pacific [17][18] - The company exited lower-priced and lower-margin business in EMEA, which contributed to volume declines but will no longer be a headwind moving forward [18] Market Performance - U S restaurant traffic declined by about 2% year-over-year, with QSR traffic declining by 1 5% [15] - In Europe, restaurant traffic was flat in the UK but declined in Germany, France, and Spain, while Japan saw QSR traffic growth decelerate [17][18] - China's restaurant traffic growth remained soft, and the Middle East and Asia Pacific faced intense competition, leading to customer share losses [18] Strategic Direction and Industry Competition - The company is evaluating opportunities to reduce manufacturing and supply chain costs, improve sales execution, and expand its total addressable market by leveraging proprietary technologies [10] - Competitors have announced plans to add over 3 5 billion pounds of capacity between 2024 and 2027, primarily in Europe, China, and Brazil, which could lead to industry capacity utilization dropping to the mid-to-high 80s [30][31][33] - The company has implemented a restructuring plan to address the supply-demand imbalance, targeting $55 million in cost savings for fiscal 2025 and $85 million in annualized savings by fiscal 2026 [34] Management Commentary on Operating Environment and Outlook - The company expects the challenging operating environment to persist due to weak restaurant traffic trends and increased industry capacity [10] - Management revised its fiscal 2025 net sales target to $6 35 billion to $6 45 billion, down from the previous range of $6 6 billion to $6 8 billion, and adjusted EBITDA target to $1 17 billion to $1 21 billion, down from $1 38 billion [38][39] - The company anticipates higher volume growth in the second half of the year, driven by international and North America segments, but expects price-mix to decline due to competitive pressures [44][45] Other Important Information - The company announced a $250 million increase to its share repurchase authorization, bringing the total available under the program to $560 million [53] - A quarterly dividend increase of $0 01 per share was declared, bringing the dividend to $0 37 per share [54] - The company expects capital expenditures to decline significantly in the second half of fiscal 2025, targeting total annual capital expenditures of $750 million [49] Q&A Summary Question: Structural EBITDA Margin in Light of Industry Capacity - The company expects normalized EBITDA margins to be in the range of 19% to 20% in the short to medium term, assuming all announced capacity expansions come online [63][64] Question: Competitor Actions on Capacity - Management believes competitors are also evaluating the industry dynamics but has not yet seen similar actions to curtail production or close facilities [67][68] Question: International Business Pressures - In Europe, pricing pressure is driven by a better-than-expected potato crop, while in Asia, competitive dynamics and ERP-related challenges have impacted customer share [74][75] Question: Gross Margin Deleverage - Production inefficiencies and unplanned downtime contributed to lower gross margins, but improvements are expected as the new Chief Supply Chain Officer implements cost-saving initiatives [79][80] Question: Customer Losses and Pricing - Customer losses were primarily due to competitive pricing, with no significant service-related issues [84] Question: Share Repurchase Aggressiveness - The company plans to opportunistically repurchase shares as free cash flow increases in the second half of the year [86] Question: Activist Investor Concerns - Management declined to comment on potential board changes or the possibility of a sale, focusing instead on the earnings outlook and leadership transition [91] Question: Demand Trends and GLP-1 Impact - Weak consumer demand is attributed to inflation and reduced restaurant traffic, with no significant impact observed from GLP-1 weight loss drugs [117][118] Question: New TAM Opportunities - The company is exploring opportunities with non-traditional customers, such as those not previously offering fries or tater tots, but did not provide specific volume potential [122] Question: Capacity Utilization and Industry Slack - The company's utilization rate is in line with industry standards in the low 90s, with improvements expected as production inefficiencies are addressed [126][127] Question: Inventory Levels - Inventory levels are typically elevated in Q2 and Q3 due to potato harvests, with reductions expected as the year progresses [149] Question: Leverage Target - The company maintains its leverage target of 3 5x, with no changes despite increased buybacks and dividends [153]

Shares of Post Holdings (NYSE: POST ) have been a solid performer over the past year as it has successfully integrated M&A deals, enabling solid free cash flow results. That said, shares have ticked down in recent days, amidOver fifteen years of experience making contrarian bets based on my macro view and stock-specific turnaround stories to garner outsized returns with a favorable risk/reward profile. If you want me to cover a specific stock or have a question for an article, just let me know!Analyst’s Dis ...

Lamb Weston (LW) came out with quarterly earnings of $0.66 per share, missing the Zacks Consensus Estimate of $1.02 per share. This compares to earnings of $1.45 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of -35.29%. A quarter ago, it was expected that this frozen foods supplier would post earnings of $0.73 per share when it actually produced earnings of $0.73, delivering no surprise.Over the last four quarters, the company ...

Key TakeawaysLamb Weston appointed a new CEO Thursday as the maker of frozen fries swung to a surprise second-quarter loss and cut its fiscal 2025 guidance.The Idaho-based company reported a second-quarter loss of $36.1 million, or $0.25 per share, while analysts were expecting a profit of $88.0 million, or $0.61 per share.Lamb Weston shares fell almost 20% in premarket trading. Shares of Lamb Weston (LW) plunged nearly 20% in premarket trading Thursday after the maker of frozen fries swung to a surprise lo ...