Lamb Weston May Keep Cutting Prices To Win Back Market Share, But Demand Recovery Remains Uncertain

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].