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Lamb Weston Holdings (LW)
NYSE:LW
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Lamb Weston Holdings
(NYSE:LW)57Neutral
Positive Factors
Acquisition Speculation
Recent rumors about being an acquisition target and activist calls for changes have led to a meaningful 2-week outperformance versus the rest of the U.S. Food universe.
Industry Structure
A more favorable industry structure and cyclicality could dictate a higher multiple for LW compared to packaged food peers.
Negative Factors
CEO Change
Investor concern that an outside replacement was not brought in for the new CEO despite the gravity of issues occurring at present.
Financial Performance
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.
Market Conditions
The company faces challenging market conditions with an accelerated rate of capacity additions impacting profitability.
Lamb Weston Holdings (LW) vs. S&P 500 (SPY)
Market Cap
$7.56B
Dividend Yield2.73%
Average Volume (3M)2.89M
Price to Earnings (P/E)21.0
Beta (1Y)0.91
Revenue Growth-0.33%
EPS Growth-67.09%
CountryUS
Employees10,700
SectorConsumer Defensive
Sector Strength73
IndustryConsumer Products - Foods
Share Statistics
EPS (TTM)2.53
Shares Outstanding142,640,700
10 Day Avg. Volume4,413,386
30 Day Avg. Volume2,894,089
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 CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$67.09Price Target Upside26.56% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering11
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 | |||||
| TTM | Jun 2024 | Jun 2023 | Jun 2022 | Jun 2021 | Jun 2020 |
|---|---|---|---|---|---|
| Income Statement | Total Revenue | ||||
| 6.33B | 6.47B | 5.35B | 4.10B | 3.67B | 3.79B | Gross Profit |
| 1.45B | 1.77B | 1.43B | 832.00M | 832.00M | 895.20M | EBIT |
| 695.90M | 1.07B | 882.10M | 444.40M | 474.80M | 556.90M | EBITDA |
| 871.20M | 1.37B | 1.10B | 635.00M | 474.80M | 556.90M | Net Income Common Stockholders |
| 367.10M | 725.50M | 1.01B | 200.90M | 317.80M | 365.90M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | ||||
| 79.00M | 71.40M | 304.80M | 525.00M | 783.50M | 1.36B | Total Assets |
| 7.45B | 7.37B | 6.52B | 4.14B | 4.21B | 4.66B | Total Debt |
| 4.11B | 3.97B | 3.49B | 2.75B | 2.77B | 3.57B | Net Debt |
| 4.03B | 3.90B | 3.19B | 2.23B | 1.98B | 2.20B | Total Liabilities |
| 5.82B | 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 | ||||
| -127.60M | -131.30M | 107.70M | 128.50M | 405.50M | 406.30M | Operating Cash Flow |
| 772.30M | 798.20M | 761.70M | 418.60M | 552.70M | 574.00M | Investing Cash Flow |
| -898.20M | -984.10M | -1.34B | -310.50M | -162.50M | -346.00M | Financing Cash Flow |
| 127.30M | -48.00M | 340.80M | -363.40M | -974.00M | 1.13B |
Lamb Weston Holdings Technical Analysis
Negative
53.01
Price Trends
58.78
Negative
67.43
Negative
69.15
Negative
Market Momentum
-2.51
Negative
40.13
Neutral
49.02
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 53.01 is below the 20-day moving average (MA) of 54.56, below the 50-day MA of 58.78, and below the 200-day MA of 69.15, indicating a bearish trend. The MACD of -2.51 indicates Negative momentum. The RSI at 40.13 is Neutral, neither overbought nor oversold. The STOCH value of 49.02 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 (63)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
75 Outperform | $21.38B | 20.26 | 5.74% | 3.23% | 1.27% | ― | |
72 Outperform | $35.55B | 14.03 | 28.02% | 3.71% | -1.48% | 11.45% | |
70 Outperform | $38.45B | 14.25 | 5.56% | 4.97% | -2.98% | -2.22% | |
66 Neutral | $13.00B | 26.60 | 5.53% | 5.14% | -2.00% | -50.02% | |
64 Neutral | $16.46B | 21.73 | 9.54% | 3.80% | -1.84% | -5.14% | |
63 Neutral | $20.85B | 13.27 | -10.88% | 7.48% | 1.13% | 11.50% | |
57 Neutral | $7.56B | 20.95 | 22.24% | 2.73% | -0.33% | -67.09% |
* Consumer Defensive Sector Average
Performance Comparison
LW
Lamb Weston Holdings
53.01
-47.05
-47.02%
CAG
Conagra Brands
27.23
0.05
0.18%
GIS
General Mills
64.50
1.18
1.86%
HRL
Hormel Foods
29.94
-3.04
-9.22%
TSN
Tyson Foods
61.24
7.28
13.49%
KHC
Kraft Heinz
32.18
-1.14
-3.42%
Lamb Weston Holdings Earnings Call Summary
Earnings Call Date: Dec 19, 2024 | % Change Since: -31.82% | Next Earnings Date: Apr 3, 2025
Earnings Call Sentiment Neutral
The earnings call revealed significant challenges with declining sales, increased competition, and manufacturing inefficiencies, but also highlighted proactive measures like leadership transition, cost-saving restructuring plans, and capital expenditure reductions. The sentiment reflects a balanced approach with both strategic adjustments to address current challenges and initiatives to enhance shareholder value.Highlights
Leadership Transition
Thomas Werner announced he will step down as CEO, and Mike Smith, the current COO, will become the new President and CEO starting January 3, 2025.
Restructuring Plan Progress
The company is on track to deliver $55 million in cost savings for fiscal 2025 and $85 million in annualized savings for 2026 through restructuring efforts.
Capital Expenditure Reduction
Lamb Weston plans to significantly reduce capital spending, targeting approximately $750 million for fiscal 2025 and $550 million for 2026.
Increased Share Repurchase Authorization
The company announced a $250 million increase in its share repurchase authorization, bringing the total to approximately $560 million.
Dividend Increase
Lamb Weston declared a $0.01 increase in its quarterly dividend to $0.37 per share.
Lowlights
Decline in Net Sales and Volume
Net sales declined by 8% and volume declined by 6% year-over-year, primarily due to declining restaurant traffic and competitive pressures.
Adjusted EBITDA Decline
Adjusted EBITDA fell by $95 million to $282 million due to unfavorable price/mix, higher manufacturing costs, and inefficiencies.
International Segment Challenges
Sales in the International segment declined by 6% due to competitive pressures, share losses, and softer restaurant traffic in key markets.
Manufacturing Inefficiencies
Higher manufacturing costs per pound and inefficiencies associated with lower production and utilization rates impacted gross profit.
Reduction in Financial Targets
The company reduced its net sales target range to $6.35 billion to $6.45 billion and adjusted EBITDA target range to $1.17 billion to $1.21 billion for the year.
Company Guidance
In the Lamb Weston second quarter fiscal year 2025 earnings call, the company adjusted its financial guidance downward due to a challenging operating environment and competitive pressures. Net sales for the year are now expected to range from $6.35 billion to $6.45 billion, reduced from the previous estimate of $6.6 billion to $6.8 billion. Adjusted EBITDA guidance was also lowered to a range of $1.17 billion to $1.21 billion, down from around $1.38 billion previously. This revision reflects a decline in net sales by 8% and volume by 6% compared to the same quarter last year, primarily due to decreased restaurant traffic and heightened competition. The company also faces a more competitive pricing environment, particularly in international markets. Despite these challenges, Lamb Weston is targeting $750 million in capital expenditures for fiscal 2025 and maintaining a leverage ratio target of 3.5x.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.