Lamb Weston Holdings (LW), a supplier of frozen potato products, was the worst performer in the S&P 500 Index (SPX) on Wednesday. The stock declined more than 28% in the regular trading session following the release of weak fiscal fourth-quarter results and a lower-than-expected outlook for Fiscal 2025.
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The company attributed its poor performance to lower pricing, declining market share, and a slowdown in restaurant traffic within the U.S. and key international markets. Importantly, CEO Tom Werner expects these challenges to persist in Fiscal 2025.
LW: Q4 Financial Highlights
The company’s net sales dropped 5% year-over-year to $1.61 billion and fell short of the analysts’ expectations of $1.7 billion. Moreover, adjusted earnings per share (EPS) decreased by 40% to $0.78, which was significantly below the Street’s estimates of $1.26 per share.
Additionally, Lamb Weston reported an 8% decline in volume, citing global weakness in restaurant demand and its exit from lower-margin businesses in Europe as key factors. The company’s inventory levels increased by 22.2% year-over-year in Q4 and put further strain on its financials.
Dim Outlook for Fiscal 2025
LW issued a cautious outlook for Fiscal 2025 due to a challenging operating environment and higher inventory levels.
The company expects to report revenues between $6.6 billion and $6.8 billion, compared with analysts’ estimates of $6.79 billion. Further, LW anticipates that earnings will fall in the range of $4.35 to $4.85 per share, below the consensus estimates of $6.10 per share.
Is LW Stock a Good Buy?
On TipRanks, it has a Strong Buy consensus rating based on six Buy and one Hold ratings. The analysts’ average price target on LW stock of $90.67 implies 60.7% upside potential. Shares of the company have declined by about 32% in the past three months.
It should be noted that the price target might change due to a significant drop in LW stock price yesterday. After the earnings release, two analysts have already reduced their targets, as seen in the image below.
