Lamb Weston Holdings (LW) AI Stock Analysis

• Market Cap: $7.80B
• Dividend Yield: 2.7%
• Average Volume (3M): 1.59M
• Price to Earnings (P/E): 21.7
• Beta (1Y): 0.41
• Revenue Growth: -2.49%
• EPS Growth: -65.96%
• Country: US
• Employees: 10,700
• Sector: Consumer Defensive
• Sector Strength: 64
• Industry: Packaged Foods
• EPS (TTM): 1.10
• Shares Outstanding: 141,115,620
• 10 Day Avg. Volume: 1,304,298
• 30 Day Avg. Volume: 1,594,127
• PEG Ratio: 0.04
• Price to Book (P/B): 11.21
• Price to Sales (P/S): 0.00
• P/FCF Ratio: 146.85
• Enterprise Value/Market Cap: 2.44
• Enterprise Value/Revenue: 0.74
• Enterprise Value/Gross Profit: 13.16
• Enterprise Value/Ebitda: 3.97
• 1Y Price Target: $63.40
• Price Target Upside: 14.67% Upside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 10

• Rating: 69 Neutral
• Price Target: $58.00 ▲(4.90%Upside)

Lamb Weston Holdings has a solid financial foundation, with robust revenue generation and profitability, despite some liquidity challenges. The technical analysis indicates a neutral trend with limited momentum. Valuation is moderate, with a reasonable P/E ratio and dividend yield. The recent earnings call showed promising strategic initiatives and strong liquidity, although the company faces some market challenges. These factors collectively result in a moderate overall stock score.

Positive Factors

Acquisition Potential

Takeout potential remains attractive at current valuation given the value of LW's integrated assets relative to current share price.

Operational Efficiency

The company is now working with Alix Partners to implement a 'value creation plan' across the P&L, including efforts to improve manufacturing, throughput, transportation, logistics, procurement, and working capital efficiencies.

Strategic Initiatives

Management is now engaged with a strategic advisor to explore value-creation and operational improvement opportunities.

Negative Factors

Competitive Pressures

Global competition for french fries has intensified with more price pressure and increased capacity announcements.

Cost and Margin Pressures

4Q gross margins are expected to decrease 700 bps sequentially to 20.6%, with softening demand environment exacerbating the issue.

Earnings Miss

Sales missed consensus by -4%, adjusted gross margin was 21.5%, EBITDA came in -14% below consensus, and Adj EPS was $0.66, below consensus of $1.02.

Lamb Weston Holdings Business Overview & Revenue Model

Company Description

Lamb Weston Holdings, Inc. is a prominent player in the food processing industry, specializing in the production and distribution of frozen potato products. With a global footprint, the company is renowned for its innovative approach to potato processing, offering a diverse range of products including fries, potato patties, and other specialty items. Lamb Weston serves various sectors including retail, foodservice, and international markets, catering to a wide array of customers from small restaurants to large fast-food chains.

How the Company Makes Money

Lamb Weston makes money primarily through the sale of its frozen potato products to a diverse customer base comprising foodservice distributors, restaurants, and retail outlets. The company generates revenue by leveraging its extensive manufacturing capabilities and logistics network to deliver high-quality potato products across different regions. Key revenue streams include long-term contracts with major fast-food chains and partnerships with supermarket giants, ensuring a consistent demand for their offerings. Additionally, Lamb Weston invests in research and development to innovate and expand its product line, which helps maintain its competitive edge and drives sales growth.

Lamb Weston Holdings Financial Statement Overview

Summary

Lamb Weston Holdings demonstrates solid financial performance with strong revenue generation and profitability. The balance sheet reflects moderate leverage, and while cash flow statements show improved cash generation, fluctuations in free cash flow signal potential liquidity issues. Overall, the company is positioned well for stability and growth in the packaged foods industry, though maintaining cash flow stability is essential.

Income Statement

Lamb Weston Holdings shows strong profitability with a consistent increase in total revenue from past years, although there was a slight decline in the most recent TTM period. Gross profit margin remains robust at approximately 22.6% in TTM, and EBIT margin is solid at around 10.8%, indicating efficient cost management. However, net income has declined recently, affecting the net profit margin, which stands at 5.7% in TTM.

Balance Sheet

The company maintains a moderate debt-to-equity ratio of approximately 2.61, suggesting a reliance on debt but within industry norms. The return on equity has decreased to 22.5% in TTM from higher levels in previous years, reflecting the decline in net income. Equity ratio stands at 22.0%, indicating a stable capital structure but with room for improvement in equity base.

Cash Flow

Lamb Weston Holdings experienced a significant increase in free cash flow to $88.1 million in TTM from a negative figure in the previous year, highlighting improved cash efficiency. The operating cash flow to net income ratio is strong at 2.18, indicating good conversion of income to cash. However, the free cash flow growth rate is volatile, and the free cash flow to net income ratio is relatively low at 0.24, suggesting potential liquidity challenges.

Breakdown
TTM	Jun 2024	Jun 2023	Jun 2022	Jun 2021	Jun 2020
Income Statement		Total Revenue
6.39B	6.47B	5.35B	4.10B	3.67B	3.79B
	Gross Profit
1.44B	1.77B	1.43B	832.00M	832.00M	895.20M
	EBIT
691.80M	1.07B	882.10M	444.40M	474.80M	556.90M
	EBITDA
1.09B	1.37B	1.10B	636.50M	662.60M	739.20M
	Net Income Common Stockholders
367.00M	725.50M	1.01B	200.90M	317.80M	365.90M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
67.50M	71.40M	304.80M	525.00M	783.50M	1.36B
	Total Assets
7.42B	7.37B	6.52B	4.14B	4.21B	4.66B
	Total Debt
4.27B	3.85B	3.49B	2.75B	2.77B	3.57B
	Net Debt
4.20B	3.78B	3.19B	2.23B	1.98B	2.20B
	Total Liabilities
5.79B	5.58B	5.11B	3.78B	3.73B	4.42B
	Stockholders Equity
1.63B	1.79B	1.41B	360.50M	480.60M	240.00M
Cash Flow		Free Cash Flow
88.10M	-131.30M	107.70M	128.50M	405.50M	406.30M
	Operating Cash Flow
802.00M	798.20M	761.70M	418.60M	552.70M	574.00M
	Investing Cash Flow
-718.30M	-984.10M	-1.34B	-310.50M	-162.50M	-346.00M
	Financing Cash Flow
-78.70M	-48.00M	340.80M	-363.40M	-974.00M	1.13B

Lamb Weston Holdings Technical Analysis

• Technical Analysis Sentiment: Neutral
• Last Price: 55.29
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Negative
• MACD: Negative
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For LW, the sentiment is Neutral. The current price of 55.29 is above the 20-day moving average (MA) of 54.36, above the 50-day MA of 53.46, and below the 200-day MA of 62.12, indicating a neutral trend. The MACD of 0.78 indicates Negative momentum. The RSI at 55.80 is Neutral, neither overbought nor oversold. The STOCH value of 51.56 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for LW.

Lamb Weston Holdings Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
INGR	75 Outperform	$8.85B	14.53	16.31%	2.32%	-6.88%	-4.93%
POST	73 Outperform	$6.32B	20.47	9.15%	―	1.48%	9.36%
LW	69 Neutral	$7.80B	21.68	21.63%	2.70%	-2.49%	-65.96%
CAG	67 Neutral	$10.30B	31.56	3.67%	6.49%	-3.15%	-65.38%
CPB	65 Neutral	$9.62B	21.31	11.67%	4.76%	8.65%	-38.57%
Sector *	65 Neutral	$8.81B	15.01	4.71%	3.72%	3.60%	-2.89%
SJM	60 Neutral	$10.15B	22.22	-17.87%	4.51%	7.07%	-181.54%

Lamb Weston Holdings Corporate Events

Lamb Weston Appoints Michael J. Smith as CEO

Lamb Weston Holdings announced the appointment of Michael J. Smith as its new President and CEO, effective January 3, 2025. Smith, who has been with the company in various leadership roles since 2011, succeeds Thomas P. Werner, who will remain as an advisor until August 2025. Smith’s compensation package includes a $1 million base salary, a bonus opportunity, and long-term stock awards, reflecting the company’s strategic focus on performance-based leadership. Werner’s compensation as an advisor includes a base salary, bonus eligibility, and full vesting of his stock awards, with continued eligibility for company benefits during the advisory period.