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 ...

Financial Performance - Net sales declined 8% to $1,601 million in Q2 FY2025 compared to Q2 FY2024[2] - Net income declined $251 million to a loss of $36 million in Q2 FY2025[2] - Adjusted EBITDA declined 25% to $282 million in Q2 FY2025[2] - Net sales for the thirteen weeks ended November 24, 2024 decreased to $1,600.9 million from $1,732.1 million in the prior year period[44] - Gross profit for the thirteen weeks ended November 24, 2024 declined to $277.8 million from $475.6 million in the prior year period[44] - Net income for the thirteen weeks ended November 24, 2024 was a loss of $36.1 million compared to a profit of $215.0 million in the prior year period[44] - Net income for the period ended November 24, 2024, was $91.3 million, compared to $449.8 million in the same period last year[53] - Net income for the twenty-six weeks ended November 24, 2024, was $91.3 million[65] - Adjusted diluted EPS for the thirteen weeks ended November 24, 2024, was $0.66, compared to $1.48 in the same period last year[61] - Diluted EPS for the twenty-six weeks ended November 24, 2024, was $0.64[65] Segment Performance - North America segment net sales declined 8% to $1,072.1 million in Q2 FY2025[16] - International segment net sales declined 6% to $528.8 million in Q2 FY2025[19] - North America segment net sales decreased by 8% to $1,072.1 million, with a 3% decline in price/mix and a 5% decline in volume[56] - International segment net sales decreased by 6% to $528.8 million, driven entirely by a 6% decline in volume[56] - North America segment Adjusted EBITDA decreased by 17% to $266.7 million[56] - International segment Adjusted EBITDA decreased by 53% to $47.4 million[56] - North America segment Adjusted EBITDA for the twenty-six weeks ended November 24, 2024, was $542.8 million[70] - International segment Adjusted EBITDA for the twenty-six weeks ended November 24, 2024, was $97.9 million[70] Cost and Expenses - Adjusted Gross Profit declined $134.9 million to $343.5 million in Q2 FY2025[12] - Restructuring expenses for the thirteen weeks ended November 24, 2024 totaled $74.6 million, primarily related to facility closures and employee severance[44] - Cost of sales for the thirteen weeks ended November 24, 2024 included $75.5 million in charges for unused raw potatoes and inventory write-offs[44] - The twenty-six weeks ended November 24, 2024 included a $39 million charge related to a voluntary product withdrawal[46] - Restructuring Plan expenses for the twenty-six weeks ended November 24, 2024, were $159.1 million[70] - Unallocated corporate costs for the twenty-six weeks ended November 24, 2024, were $(68.9) million[70] - Income tax expense for the twenty-six weeks ended November 24, 2024, was $64.2 million[65] - Interest expense for the twenty-six weeks ended November 24, 2024, was $88.5 million[65] Cash Flow and Liquidity - Net cash provided by operating activities for the first half of fiscal 2025 was $429.3 million, down $25.9 million versus the prior year period[22] - Capital expenditures during the first half of fiscal 2025 were $486.4 million, down $73.0 million versus the prior year period[23] - The Company had $79.0 million of cash and cash equivalents and $1,211.9 million of available liquidity under its revolving credit facility as of November 24, 2024[25] - Cash and cash equivalents increased to $79.0 million as of November 24, 2024 from $71.4 million as of May 26, 2024[50] - Net cash provided by operating activities was $429.3 million, slightly down from $455.2 million in the previous year[53] - Additions to property, plant, and equipment were $474.6 million, down from $507.6 million in the previous year[53] - Proceeds from short-term borrowings increased significantly to $811.6 million, compared to $194.3 million in the prior year[53] Shareholder Returns - The Company returned $103.3 million to shareholders through cash dividends and repurchased $82.0 million of its common stock in the first half of fiscal 2025[26] - The Board of Directors approved an increase of $250 million in the Company's share repurchase authorization, bringing the total to $750 million[27] - Repurchase of common stock and common stock withheld to cover taxes amounted to $92.8 million, down from $164.3 million in the previous year[53] Outlook and Targets - Updated fiscal 2025 outlook projects net sales of $6.35 billion to $6.45 billion[2] - The Company reduced its annual net sales target range to $6.35 billion to $6.45 billion, down from $6.6 billion to $6.8 billion[29] - The Company reduced its GAAP net income target range to $330 million to $350 million and Diluted EPS to $2.30 to $2.45[30] - The Company reduced its Adjusted EBITDA target range to $1,170 million to $1,210 million from approximately $1,380 million[31] - The Company reduced its Adjusted Net Income target range to $440 million to $460 million and Adjusted Diluted EPS to $3.05 to $3.20[32] - The Company expects cash used for capital expenditures, excluding acquisitions, to be approximately $750 million[33] Restructuring Plan - Restructuring Plan expected to generate $55 million in pre-tax cost savings in FY2025[7] - Restructuring expenses for the thirteen weeks ended November 24, 2024 totaled $74.6 million, primarily related to facility closures and employee severance[44] - Restructuring Plan expenses for the twenty-six weeks ended November 24, 2024, were $159.1 million[70] Volume and Traffic Trends - Volume declined 6% in Q2 FY2025, reflecting soft global restaurant traffic trends[9] - North America segment net sales decreased by 8% to $1,072.1 million, with a 3% decline in price/mix and a 5% decline in volume[56] - International segment net sales decreased by 6% to $528.8 million, driven entirely by a 6% decline in volume[56] Equity and Investments - Equity method investment earnings were $2.1 million in Q2 FY2025[21] Balance Sheet - Inventories increased to $1,327.2 million as of November 24, 2024 from $1,138.6 million as of May 26, 2024[50] - Long-term debt increased to $3,693.6 million as of November 24, 2024 from $3,440.7 million as of May 26, 2024[50] - Total assets increased to $7,452.1 million as of November 24, 2024 from $7,367.0 million as of May 26, 2024[50] Adjusted Metrics - Adjusted EBITDA for the twenty-six weeks ended November 24, 2024, was $571.8 million[70] - Gross profit for the twenty-six weeks ended November 24, 2024, was $633.8 million[65]

Lamb Weston Holdings, Inc. (LW) is facing pressure from JANA Partners, one of the company’s largest shareholders with more than 5% ownership. In the latest development, JANA Partners sent a letter to Lamb Weston, stressing that the latter needs major changes in its board and leadership. In the absence of any changes, JANA believes that LW should consider exploring strategic options, including a possible sale, to get the best value for its shareholders.Recent reports also suggested that Post Holdings (POST) ...

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 ...

Lamb Weston Holdings, Inc. (LW) is likely to register a decline in its top and bottom lines when it reports second-quarter fiscal 2025 earnings on Dec. 19. The Zacks Consensus Estimate for revenues is pegged at $1.7 billion, which suggests a decline of 3.5% from the prior-year quarter’s reported figure. The consensus mark for earnings has moved down a couple of cents in the past 30 days to $1.05 per share, indicating a decline of 27.6% from the year-ago quarter’s reported figure. LW has a trailing four-quar ...

Business: Lamb Weston is a global producer, distributor and marketer of value-added frozen potato products. The company is a supplier of frozen potato, sweet potato, appetizer and vegetable products to restaurants and retailers around the globe. Lamb Weston's frozen potato products are sold in North America and international markets generally to North American-based restaurant chains and international customers, comprised of global and regional quick service and full-service restaurant chains, food-service ...