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Lamb Weston Holdings (LW)
NYSE:LW
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Lamb Weston Holdings
(NYSE:LW)
68Neutral
Positive Factors
Acquisition Potential
Takeout potential remains attractive at current valuation given the value of LW's integrated assets relative to current share price.
Cost Savings Initiatives
The company is on track for pre-tax cost savings initiatives, assisted by AlixPartners.
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.
Financial Performance
2Q sales and gross margin were well below estimates creating deleverage at the adj EBITDA and adj EPS lines.
Macroeconomic Challenges
Management expects the operating environment to remain challenged through FY2025 and into FY2026 as incremental capacity and softness in potato demand persists.
Lamb Weston Holdings (LW) vs. S&P 500 (SPY)
Market Cap
$7.90B
Dividend Yield2.75%
Average Volume (3M)3.02M
Price to Earnings (P/E)22.0
Beta (1Y)0.34
Revenue Growth-2.49%
EPS Growth-65.96%
CountryUS
Employees10,700
SectorConsumer Defensive
Sector Strength92
IndustryPackaged Foods
Share Statistics
EPS (TTM)1.10
Shares Outstanding141,115,620
10 Day Avg. Volume4,104,116
30 Day Avg. Volume3,020,727
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)1.20
Price to Cash Flow (P/CF)19.10
P/FCF Ratio0.00
Enterprise Value/Market Cap1.54
Enterprise Value/RevenueN/A
Enterprise Value/Gross Profit6.88
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$63.75Price Target Upside22.34% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering9
Lamb Weston Holdings Business Overview & Revenue Model
Company DescriptionLamb Weston Holdings, Inc. (LW) is a leading global supplier of frozen potato products. The company specializes in the production and distribution of a variety of frozen potato products, including french fries, potato patties, and mashed potatoes, catering primarily to the foodservice sector, retail customers, and international markets. Headquartered in Eagle, Idaho, Lamb Weston operates through a network of strategically located production facilities and is recognized for its innovation in potato processing technology and commitment to quality.
How the Company Makes MoneyLamb Weston makes money primarily through the sale of its frozen potato products to a diverse customer base that includes restaurants, retailers, and foodservice distributors. The company's revenue model is centered around long-term supply agreements and its ability to leverage economies of scale in potato processing and distribution. Key revenue streams include direct sales to foodservice chains, private-label products for retailers, and exports to international markets. Lamb Weston also benefits from strategic partnerships and joint ventures that expand its market presence and distribution capabilities, contributing significantly to its earnings. Additionally, the company's focus on product innovation and operational efficiency enhances its competitive positioning and profitability.
Lamb Weston Holdings Financial Statement Overview
Summary
Lamb Weston Holdings shows strong revenue growth and profitability, though margins have slightly declined. The company has high leverage, posing financial risks, and faces liquidity challenges due to negative free cash flow and high capital expenditures.Income Statement
Lamb Weston Holdings exhibits consistent revenue growth with a significant increase from $4.1 billion in 2022 to $6.3 billion in TTM 2024. The gross profit margin is robust at 22.92% for TTM 2024, though slightly down from the previous year. Net profit margin stands at 5.80% in TTM, indicating profitability, but it's a decline from the previous year. EBIT and EBITDA margins show stability, with TTM figures at 10.99% and 13.77% respectively, though both have declined compared to the prior year.75
Positive
Balance Sheet
The company maintains a high debt-to-equity ratio of 2.52 in TTM 2024, reflecting significant leverage, which poses financial risk especially in volatile markets. Return on equity for TTM 2024 is 22.48%, indicating efficient use of equity to generate profits. The equity ratio at 21.90% suggests a moderate level of equity financing compared to total assets.70
Positive
Cash Flow
The operating cash flow to net income ratio of 2.10 in TTM 2024 demonstrates strong cash conversion, but the free cash flow to net income ratio is negative due to high capital expenditures, indicating potential liquidity challenges. Free cash flow growth has been negative recently, further stressing cash flow management.65
Positive
| Breakdown | ||||
| Jun 2024 | Jun 2023 | Jun 2022 | Jun 2021 | Jun 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 6.47B | 5.35B | 4.10B | 3.67B | 3.79B | Gross Profit |
| 1.77B | 1.43B | 832.00M | 832.00M | 895.20M | EBIT |
| 1.07B | 882.10M | 444.40M | 474.80M | 556.90M | EBITDA |
| 1.37B | 1.10B | 635.00M | 474.80M | 556.90M | Net Income Common Stockholders |
| 725.50M | 1.01B | 200.90M | 317.80M | 365.90M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 71.40M | 304.80M | 525.00M | 783.50M | 1.36B | Total Assets |
| 7.37B | 6.52B | 4.14B | 4.21B | 4.66B | Total Debt |
| 3.85B | 3.49B | 2.75B | 2.77B | 3.57B | Net Debt |
| 3.78B | 3.19B | 2.23B | 1.98B | 2.20B | Total Liabilities |
| 5.58B | 5.11B | 3.78B | 3.73B | 4.42B | Stockholders Equity |
| 1.79B | 1.41B | 360.50M | 480.60M | 240.00M |
| Cash Flow | Free Cash Flow | |||
| -131.30M | 107.70M | 128.50M | 405.50M | 406.30M | Operating Cash Flow |
| 798.20M | 761.70M | 418.60M | 552.70M | 574.00M | Investing Cash Flow |
| -984.10M | -1.34B | -310.50M | -162.50M | -346.00M | Financing Cash Flow |
| -48.00M | 340.80M | -363.40M | -974.00M | 1.13B |
Lamb Weston Holdings Technical Analysis
Negative
52.11
Price Trends
53.12
Negative
58.66
Negative
63.50
Negative
Market Momentum
-0.59
Positive
45.01
Neutral
54.67
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For LW, the sentiment is Negative. The current price of 52.11 is below the 20-day moving average (MA) of 53.94, below the 50-day MA of 53.12, and below the 200-day MA of 63.50, indicating a bearish trend. The MACD of -0.59 indicates Positive momentum. The RSI at 45.01 is Neutral, neither overbought nor oversold. The STOCH value of 54.67 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for LW.
Lamb Weston Holdings Risk Analysis
Lamb Weston Holdings disclosed 27 risk factors in its most recent earnings report. Lamb Weston Holdings reported the most risks in the “Ability to Sell” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Lamb Weston Holdings Peers Comparison
Overall Rating
UnderperformOutperform
Sector (64)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
73 Outperform | $8.42B | 13.48 | 17.62% | 2.38% | -8.95% | 1.35% | |
70 Outperform | $6.35B | 18.91 | 10.01% | ― | 7.32% | 34.44% | |
68 Neutral | $12.50B | 38.32 | 3.67% | 5.67% | -3.15% | -65.38% | |
68 Neutral | $7.90B | 21.95 | 21.63% | 2.75% | -2.49% | -65.96% | |
66 Neutral | $11.37B | 21.97 | 13.43% | 4.11% | 9.15% | -31.94% | |
64 Neutral | $8.82B | 14.87 | 4.61% | 174.99% | 3.74% | 5.11% | |
61 Neutral | $12.34B | 22.22 | -3.55% | 3.70% | 7.07% | -181.54% |
* Consumer Defensive Sector Average
Performance Comparison
LW
Lamb Weston Holdings
52.11
-30.97
-37.28%
CPB
Campbell Soup
35.89
-8.41
-18.98%
CAG
Conagra Brands
24.18
-5.12
-17.47%
SJM
JM Smucker
113.77
5.19
4.78%
POST
Post Holdings
112.45
7.55
7.20%
INGR
Ingredion
131.00
18.53
16.48%
Lamb Weston Holdings Earnings Call Summary
Earnings Call Date:Apr 03, 2025
(Q3-2025)
| % Change Since: -3.77%|
Next Earnings Date:Jul 29, 2025
Earnings Call Sentiment Neutral
The earnings call reflects a company navigating a challenging macroeconomic environment with successful volume and sales growth, strategic cost reductions, and innovative product launches. However, the company faces significant challenges, including soft restaurant traffic, price/mix declines, and increased costs, particularly in the international segment.Q3-2025 Updates
Positive Updates
Volume and Sales Growth
In the third quarter, Lamb Weston grew volume by 9%, increased net sales by 4%, and grew adjusted EBITDA by 6%, reflecting efforts to regain business, grow volume, and lower expenses.
Cost Reduction and Efficiency Plans
Lamb Weston is on track to deliver at least $55 million of pretax savings in fiscal 2025 and $85 million in fiscal 2026 through restructuring and operational efficiencies.
Innovation and Product Expansion
The company launched new battered and seasoned products, fridge-friendly fries, and expanded its brand portfolio with products like Onion Rings and Cheesy Potato Bites, receiving positive feedback.
Strong Liquidity Position
Lamb Weston ended the third quarter with approximately $1.1 billion of liquidity, maintaining a leverage ratio of 3.4x.
Negative Updates
Soft Restaurant Traffic
QSR traffic worsened during the fiscal third quarter, with a 2% decline compared with the prior year quarter. Traffic at hamburger-specializing QSR chains was down about twice as much.
Price/Mix Decline
Price/mix declined 5% compared to the prior year quarter due to planned investments in price to compete in a competitive environment.
Increased Costs and Inventory Levels
Higher overall transportation and warehousing costs were driven by higher inventory levels, impacting adjusted gross profit.
International Segment Challenges
The International segment saw an 8.5 million decline in adjusted EBITDA due to unfavorable price/mix and competitive pressures.
Company Guidance
During the Lamb Weston Third Quarter FY 2025 Earnings Call, the company outlined several key metrics and strategic initiatives aimed at enhancing operational efficiency and driving growth. Notably, Lamb Weston achieved a 9% increase in volume, a 4% growth in net sales, and a 6% rise in adjusted EBITDA compared to the prior year. The company announced it is on track to deliver at least $55 million in pretax savings for fiscal 2025 and $85 million in fiscal 2026 through its restructuring plan. It also highlighted ongoing contract negotiations, predicting a mid-single-digit percent decline in potato prices for the 2025 crop. Despite challenges in the consumer market and competitive price pressures, Lamb Weston maintained its full-year revenue guidance between $6.35 billion to $6.45 billion and adjusted EBITDA guidance between $1.17 billion to $1.21 billion. Furthermore, the company has engaged AlixPartners to accelerate an end-to-end value creation plan, with over 30 projects underway to optimize costs and improve customer value propositions.Lamb Weston Holdings Corporate Events
Executive/Board Changes
Lamb Weston Appoints Michael J. Smith as CEO
Neutral
Dec 23, 2024
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.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.