Lancaster Colony (LANC) AI Stock Analysis

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Lancaster Colony

(NASDAQ:LANC)

69Neutral

Lancaster Colony's strong financial performance and positive earnings call results are offset by weak technical indicators and high valuation. While the company is financially healthy, its stock may be overvalued with limited near-term momentum.

Positive Factors

Earnings

New product momentum helps fuel better than expected margins and earnings results for LANC.

Manufacturing Capacity

LANC is on track to complete the $75M purchase of the Winland Foods Atlanta, GA sauce and dressing production facility, which is a capital efficient way to unlock manufacturing capacity.

Sales Volume

Continued momentum with both owned and licensed branded products was highlighted by much stronger than expected sales volumes.

Negative Factors

Capital Expenditure

The $75M purchase of the Winland Foods production facility requires significant capital investment, impacting short-term financial flexibility.

Lancaster Colony (LANC) vs. S&P 500 (SPY)

Market Cap

$4.96B

Dividend Yield2.06%

Average Volume (3M)165.93K

Price to Earnings (P/E)31.6

Beta (1Y)0.31

Revenue Growth1.77%

EPS Growth21.41%

CountryUS

Employees3,400

SectorConsumer Defensive

Sector Strength94

IndustryPackaged Foods

Share Statistics

EPS (TTM)5.69

Shares Outstanding27,572,000

10 Day Avg. Volume158,112

30 Day Avg. Volume165,929

Financial Highlights & Ratios

PEG Ratio1.48

Price to Book (P/B)N/A

Price to Sales (P/S)2.54

Price to Cash Flow (P/CF)11.20

P/FCF Ratio11.20

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$207.00

Price Target Upside15.13% Upside

Rating ConsensusHold

Number of Analyst Covering5

Lancaster Colony Business Overview & Revenue Model

Company DescriptionLancaster Colony Corporation is an American food company that specializes in the production and distribution of specialty food products. Founded in 1961, the company operates primarily in the retail and foodservice sectors. Lancaster Colony is known for its high-quality brands, including Marzetti, New York Bakery, and Sister Schubert's, which offer a range of products such as salad dressings, croutons, frozen breads, and dips.

How the Company Makes MoneyLancaster Colony makes money primarily through the sale of its specialty food products to both retail and foodservice customers. The company's revenue streams are diversified across its branded retail products sold in grocery stores, supermarkets, and mass merchandisers, as well as its foodservice offerings that cater to restaurants and institutions. Lancaster Colony's strong brand portfolio and reputation for quality enable it to maintain robust distribution channels and partnerships with major retailers and foodservice operators, which are significant contributors to its earnings.

Lancaster Colony Financial Statement Overview

Summary

Lancaster Colony demonstrates strong financial health with solid revenue growth, healthy profit margins, a conservative balance sheet with low debt, and effective cash conversion. These metrics indicate a robust financial performance.

Income Statement

Very Positive

Lancaster Colony shows a robust financial performance with a consistent upward trajectory in revenues and profitability. The TTM (Trailing-Twelve-Months) Gross Profit Margin is healthy at 23.45%, and the Net Profit Margin stands at 8.25%. The company has experienced a solid revenue growth rate of 13.34% from 2022 to 2023, indicating strong market demand and pricing power. EBIT and EBITDA margins are also strong at 11.75% and 13.56%, respectively, reflecting operational efficiency.

Balance Sheet

Very Positive

The balance sheet of Lancaster Colony is strong with a low Debt-to-Equity Ratio of 0.04, signaling a conservative leverage position. The Return on Equity is impressive at 16.00%, showcasing the company’s ability to generate profits with its equity base. The Equity Ratio is high at 59.84%, indicating a strong equity buffer and financial stability. The company's balance sheet reflects a prudent financial strategy with low debt levels.

Cash Flow

Positive

Lancaster Colony's cash flow position is solid, with a Free Cash Flow Growth Rate of 31.50% over the last year. The Operating Cash Flow to Net Income Ratio is 1.52, highlighting effective cash generation relative to reported earnings. The Free Cash Flow to Net Income Ratio is 1.14, indicating strong cash conversion. However, the cash flow from financing activities is negative, suggesting higher dividend payouts or debt repayments.

TTM	Jun 2024	Jun 2023	Jun 2022	Jun 2021	Jun 2020
Breakdown
Income Statement		Total Revenue
1.90B	1.87B	1.82B	1.68B	1.47B	1.33B
	Gross Profit
445.70M	432.30M	388.57M	355.72M	386.72M	358.04M
	EBIT
208.36M	199.36M	141.51M	111.91M	132.36M	140.27M
	EBITDA
281.01M	270.13M	217.69M	189.50M	228.17M	215.74M
	Net Income Common Stockholders
156.87M	158.61M	111.29M	89.59M	142.33M	136.98M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
203.07M	163.44M	88.47M	60.28M	188.06M	198.27M
	Total Assets
1.24B	1.21B	1.11B	1.09B	1.10B	993.35M
	Total Debt
41.53M	57.67M	29.99M	36.23M	33.27M	24.66M
	Net Debt
-161.54M	-105.78M	-58.49M	-24.05M	-154.78M	-173.61M
	Total Liabilities
259.99M	281.16M	250.73M	245.69M	258.14M	210.05M
	Stockholders Equity
979.87M	925.77M	862.27M	844.69M	843.15M	783.30M
Cash Flow		Free Cash Flow
178.44M	183.98M	135.72M	-30.16M	86.32M	88.13M
	Operating Cash Flow
237.54M	251.55M	225.90M	101.81M	174.19M	170.77M
	Investing Cash Flow
-59.92M	-67.43M	-90.78M	-132.24M	-88.98M	-83.27M
	Financing Cash Flow
-108.39M	-109.15M	-106.93M	-97.34M	-95.43M	-85.52M

Lancaster Colony Technical Analysis

Technical Analysis Sentiment

Neutral

Last Price179.80

Price Trends

50DMA

182.16

Negative

100DMA

180.94

Negative

200DMA

180.95

Negative

Market Momentum

MACD

-2.80

Positive

RSI

39.43

Neutral

STOCH

20.66

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For LANC, the sentiment is Neutral. The current price of 179.8 is above the 20-day moving average (MA) of 177.91, below the 50-day MA of 182.16, and below the 200-day MA of 180.95, indicating a neutral trend. The MACD of -2.80 indicates Positive momentum. The RSI at 39.43 is Neutral, neither overbought nor oversold. The STOCH value of 20.66 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for LANC.

Lancaster Colony Risk Analysis

Lancaster Colony disclosed 28 risk factors in its most recent earnings report. Lancaster Colony reported the most risks in the “Production” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Lancaster Colony Peers Comparison

Overall Rating

UnderperformOutperform

Sector (62)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
POST	75 Outperform	$6.64B	19.76	10.01%	―	7.32%	34.44%
BRFS	72 Outperform	$5.50B	9.10	21.60%	2.67%	5.85%	―
LW	72 Outperform	$8.33B	23.14	21.63%	2.46%	-2.49%	-65.96%
LANC	69 Neutral	$4.96B	31.58	16.57%	2.06%	1.77%	21.41%
SMPL	66 Neutral	$3.42B	24.18	8.39%	―	9.07%	5.85%
Sector *	62 Neutral	$20.22B	13.99	-16.14%	3.22%	1.15%	3.41%
FLO	59 Neutral	$3.97B	16.09	17.97%	5.10%	0.25%	101.63%

* Consumer Defensive Sector Average

Performance Comparison

LANC

Lancaster Colony

179.80

-19.01

-9.56%

BRFS

BRF SA

3.28

-0.01

-0.30%

FLO

Flowers Foods

18.82

-3.28

-14.84%

SMPL

Simply Good Foods

33.85

1.58

4.90%

POST

Post Holdings

117.52

15.54

15.24%

Lamb Weston Holdings

59.00

-17.17

-22.54%

Lancaster Colony Earnings Call Summary

Earnings Call Date: Feb 4, 2025 | % Change Since: 8.52% | Next Earnings Date: May 1, 2025

Earnings Call Sentiment Positive

Lancaster Colony reported strong financial performance with record highs in key financial metrics and maintained a strong strategic position with successful licensing and planned acquisitions. However, there were notable impacts from pension settlement charges and acquisition integration costs. The company remains optimistic about future growth despite potential challenges in the foodservice segment.

Highlights

Record Highs for Key Financial Metrics

Lancaster Colony reported record highs for net sales, gross profit, and operating income for the fiscal second quarter. Consolidated net sales increased 4.8% to $509 million, gross profit improved 9.3% to $133 million, and operating income grew 15.1% to $76 million.

Strong Retail Segment Performance

Retail segment net sales increased by 6.3%, driven by volume growth from both the licensing program and the company's own brands. Licensing saw strong consumer demand for Texas Roadhouse dinner rolls, Buffalo Wild Wings sauces, Subway sauces, and Olive Garden dressings.

Successful Licensing Program

The licensing program's success is evident with the growth of brands like Olive Garden, Chick-fil-A, and the recently introduced Texas Roadhouse rolls. Olive Garden dressings reached over $160 million in scanner sales.

Foodservice Segment Growth

Foodservice segment net sales grew 3%, led by higher demand from several core national chain restaurant accounts and increased sales for branded foodservice products.

Planned Acquisition for Strategic Expansion

Lancaster Colony announced the acquisition of an Atlanta-based manufacturing facility to enhance their sauce and dressing operations, supporting long-term business needs with improved operational efficiency and capacity.

Strong Financial Position

The company maintains a debt-free balance sheet with $203.1 million in cash, and returned funds to shareholders with a 6% increase in quarterly cash dividend to $0.95 per share.

Lowlights

Impact of Pension Settlement Charge

The company recorded a $14 million non-cash pension settlement charge which reduced EPS by $0.39 per share, impacting overall earnings.

Moderate Headwinds from Acquisition Integration

Integration costs related to the Atlanta-based facility acquisition increased selling, general and administrative expenses by $1.6 million, impacting operating income growth.

Potential Challenges in Foodservice Segment

External economic factors and consumer behavior could impact demand in the foodservice industry, with traffic expected to potentially decline by 1-2%.

Company Guidance

In the Lancaster Colony Corporation's fiscal year 2025 second quarter conference call, key financial metrics showed noteworthy performance. The company reported record highs with consolidated net sales rising 4.8% to $509 million, gross profit improving 9.3% to $133 million, and operating income growing 15.1% to $76 million. The retail segment saw a 6.3% increase in net sales, largely driven by the success of licensed products like Texas Roadhouse dinner rolls and Buffalo Wild Wings sauces. Additionally, the company's gross profit margin improved by 110 basis points to 26.1%. In the Foodservice segment, net sales grew by 3%, supported by higher demand from national chain restaurant accounts. Despite a $14 million non-cash pension settlement charge, the company's financial health remained strong with a debt-free balance sheet and $203.1 million in cash. Lancaster Colony also plans to invest $75 million in acquiring an Atlanta-based manufacturing facility to enhance its manufacturing network.

Lancaster Colony Corporate Events

Executive/Board Changes

Lancaster Colony Subsidiary Announces Executive Severance Agreement

Neutral

Dec 6, 2024

Lancaster Colony Corporation’s subsidiary, T. Marzetti Company, has outlined a detailed severance agreement as Carl R. Stealey departs without cause. During a transition period, Stealey will continue to receive regular compensation and benefits, and post-departure, he will gain severance pay, insurance subsidies, bonuses, and stock awards. The agreement also includes confidentiality and non-solicitation clauses, ensuring a smooth and professionally managed transition.

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.