We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Lamb Weston Holdings, Inc. (LW - Free Report) posted results for the first quarter of fiscal 2025, with the top and the bottom line declining year over year. Quarterly net sales surpassed the Zacks Consensus Estimate while earnings met the same.
LW’s bottom line came in at 73 cents, which was in line with the Zacks Consensus Estimate. However, the metric dropped 55% year over year. The downside was due to lower adjusted income from operations, caused by several factors, including a higher effective tax rate, along with increased interest expenses.
Net sales amounted to $1,654.1 million, surpassing the Zacks Consensus Estimate of $1,555.2 million. The top line fell 1% year over year. The company noted that restaurant traffic and frozen potato demand remain soft compared with supply and this trend is expected to continue throughout fiscal 2025. Nevertheless, from improved volume performance, solid price/mix and effective cost management offered respite.
Lamb Weston also announced a Restructuring Plan aimed at enhancing operating efficiency, profitability and cash flow, while positioning the company to make strategic investments that support its customers and drive long-term value for stakeholders.
Management reaffirmed its fiscal 2025 net sales outlook but revised adjusted earnings per share (EPS) guidance downward.
Lamb Weston’s volume fell 3% caused by customer share losses, weak restaurant traffic and the company's strategic decision last year to exit lower-priced and lower-margin businesses in Europe. In addition, a voluntary product withdrawal in late fiscal 2024 impacted results, though growth in key international markets helped offset the volume decline. Our model suggested a volume decrease of 3.5% in the quarter.
Price/mix increased 2%, thanks to inflation-driven price hikes in Europe and North America, though unfavorable channel and product mix, along with targeted investments in pricing and trade support, partially offset these gains. We expected the price/mix to grow 3.2% in the quarter.
The adjusted gross profit dropped $137.2 million to $353.1 million due to increased manufacturing costs per pound, a $39 million loss from a voluntary product withdrawal, lower sales volumes and higher warehouse expenses. This decline was partially offset by gains from pricing actions. The rise in manufacturing costs was caused by input cost inflation like higher raw potato costs, production inefficiencies and $15.5 million in increased depreciation expenses linked to the company’s recent capacity expansions in China and the United States.
Adjusted selling, general and administrative (SG&A) rose $5.5 million to $165.9 million, on the back of higher non-cash amortization and expenses related to its new enterprise resource planning system. Cost savings initiatives offset the impact of inflation and investments in information technology.
Adjusted EBITDA fell $122.9 million to $289.9 million, primarily due to lower sales and a decline in adjusted gross profit.
LW Provides First-Quarter Insights by Segment
Net sales for the North America segment dropped 3% to $1,103.7 million, with a 4% decline in volume due to customer share losses and reduced U.S. restaurant traffic. Price/mix increased 1%, benefiting from inflation-driven pricing actions for large and regional chain restaurant contracts in fiscal 2024.
However, this was partially offset by unfavorable channel and product mix, along with targeted investments in pricing and trade support aimed at attracting and retaining volume across all sales channels. North America Segment Adjusted EBITDA fell $103.3 million to $276.1 million, primarily due to higher manufacturing costs per pound, a charge for the voluntary product withdrawal and lower sales volumes, partially offset by gains from pricing actions.
Net sales for the International segment rose 4% to $550.4 million, despite a 1% decline in volume. The volume decrease was caused by the company's prior decision to exit lower-priced and lower-margin business in Europe to optimize customer and product mix, along with the impact of a voluntary product withdrawal.
However, growth in key international markets outside Europe helped offset the decline. Price/mix increased 5% due to pricing actions taken this fiscal year to combat input cost inflation. International Segment Adjusted EBITDA dropped $39.1 million to $50.5 million, primarily due to the voluntary product withdrawal and higher manufacturing costs per pound, though this was partially offset by inflation-driven pricing benefits.
Lamb Weston’s Financial Health Snapshot
The company ended the quarter with cash and cash equivalents of $120.8 million, long-term debt and financing obligations (excluding the current portion) of $3,437.3 million and total shareholders’ equity of $1,836.7 million.
The company generated $330.2 million as net cash from operating activities for 13 weeks ended Aug. 25, 2024, wherein capital expenditures amounted to $335.6 million.
Management paid out dividends worth $52 million and repurchased $82 million worth of stocks in the quarter. The company has shares worth $308 million remaining under its current buyback plan.
Lamb Weston Implements Restructuring Plan
The company is rolling out a restructuring plan aimed at enhancing operational and cost efficiencies while improving cash flow and enabling continued strategic investments for long-term value creation. Key elements of the plan include the permanent closure of its Connell, WA manufacturing facility, effective Oct. 1, 2024, temporary curtailment of specific production lines across North America and a reduction in operating expenses. This includes a 4% reduction in the global workforce and the elimination of certain unfilled positions. In addition, capital expenditures for fiscal 2025 will be reduced $100 million, lowering the estimate to $750 million from $850 million. The company expects the restructuring plan to generate around $55 million in pre-tax cost savings and reduce working capital in fiscal 2025.
Image Source: Zacks Investment Research
What to Expect From LW in FY25?
The company reaffirmed its fiscal 2025 net sales target of $6.6 billion to $6.8 billion, representing growth of approximately 2% to 5% on a constant currency basis, with volume increases expected to be the primary driver of sales growth.
The company anticipates achieving the low end of its adjusted EBITDA target range of $1,380 million to $1,480 million. Higher manufacturing costs per pound, net of restructuring savings, less favorable product mix and slightly higher-than-expected investments in pricing and trade are expected to offset reductions in adjusted SG&A expenses.
The company lowered its adjusted SG&A target range to $680-$690 million, down from $740 million to $750 million, caused by cost savings from the Restructuring Plan, including headcount reductions across commercial and support functions, the elimination of certain unfilled positions and additional savings initiatives not linked to the restructuring efforts.
The company lowered its adjusted net income target range to $600-$615 million and adjusted EPS to $4.15-$4.35, reflecting reduced adjusted EBITDA guidance range. The adjustment also accounts for increased estimates for interest expenses and the effective tax rate for the full year. Previously, the company projected adjusted net income of $630 million to $705 million and adjusted EPS of $4.35 to $4.85 for fiscal 2025.
The company anticipates an interest expense of around $185 million, depreciation and amortization expenses of approximately $375 million and an effective tax rate of about 25%.
Shares of this Zacks Rank #5 (Strong Sell) company have lost 21.5% in the past three months against the industry’s 8.8% growth.
Some Better-Ranked Staple Bets
Here, we have highlighted three better-ranked food stocks — The Chef's Warehouse (CHEF - Free Report) , Flowers Foods (FLO - Free Report) and McCormick & Company, Inc. (MKC - Free Report) .
CHEF has a trailing four-quarter earnings surprise of 33.7%, on average. The Zacks Consensus Estimate for The Chef’s Warehouse’s current fiscal year sales and earnings each indicates growth of 9.7% and 12.6%, respectively, from the year-ago reported numbers.
Flowers Foods, one of the largest producers of packaged bakery foods in the United States, currently carries a Zacks Rank #2. FLO has a trailing four-quarter earnings surprise of 1.9%, on average. The Zacks Consensus Estimate for Flowers Foods’ current financial-year sales and earnings implies growth of around 1% and 5%, respectively, from the year-ago reported numbers.
McCormick is a leading manufacturer, marketer and distributor of spices, seasonings, specialty foods and flavors. It currently carries a Zacks Rank # 2. The Zacks Consensus Estimate for McCormick & Company’s current fiscal-year sales and earnings indicates advancements of 0.2% and 5.6%, respectively, from the year-ago reported figures. MKC has a trailing four-quarter earnings surprise of 8.3%, on average.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
LW Q1 Earnings Meet Estimates, Profit View Cut Amid Demand Slowdown
Lamb Weston Holdings, Inc. (LW - Free Report) posted results for the first quarter of fiscal 2025, with the top and the bottom line declining year over year. Quarterly net sales surpassed the Zacks Consensus Estimate while earnings met the same.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
LW’s bottom line came in at 73 cents, which was in line with the Zacks Consensus Estimate. However, the metric dropped 55% year over year. The downside was due to lower adjusted income from operations, caused by several factors, including a higher effective tax rate, along with increased interest expenses.
Net sales amounted to $1,654.1 million, surpassing the Zacks Consensus Estimate of $1,555.2 million. The top line fell 1% year over year. The company noted that restaurant traffic and frozen potato demand remain soft compared with supply and this trend is expected to continue throughout fiscal 2025. Nevertheless, from improved volume performance, solid price/mix and effective cost management offered respite.
Lamb Weston also announced a Restructuring Plan aimed at enhancing operating efficiency, profitability and cash flow, while positioning the company to make strategic investments that support its customers and drive long-term value for stakeholders.
Management reaffirmed its fiscal 2025 net sales outlook but revised adjusted earnings per share (EPS) guidance downward.
Lamb Weston Price, Consensus and EPS Surprise
Lamb Weston price-consensus-eps-surprise-chart | Lamb Weston Quote
LW’s Quarterly Results: Key Metrics & Insights
Lamb Weston’s volume fell 3% caused by customer share losses, weak restaurant traffic and the company's strategic decision last year to exit lower-priced and lower-margin businesses in Europe. In addition, a voluntary product withdrawal in late fiscal 2024 impacted results, though growth in key international markets helped offset the volume decline. Our model suggested a volume decrease of 3.5% in the quarter.
Price/mix increased 2%, thanks to inflation-driven price hikes in Europe and North America, though unfavorable channel and product mix, along with targeted investments in pricing and trade support, partially offset these gains. We expected the price/mix to grow 3.2% in the quarter.
The adjusted gross profit dropped $137.2 million to $353.1 million due to increased manufacturing costs per pound, a $39 million loss from a voluntary product withdrawal, lower sales volumes and higher warehouse expenses. This decline was partially offset by gains from pricing actions. The rise in manufacturing costs was caused by input cost inflation like higher raw potato costs, production inefficiencies and $15.5 million in increased depreciation expenses linked to the company’s recent capacity expansions in China and the United States.
Adjusted selling, general and administrative (SG&A) rose $5.5 million to $165.9 million, on the back of higher non-cash amortization and expenses related to its new enterprise resource planning system. Cost savings initiatives offset the impact of inflation and investments in information technology.
Adjusted EBITDA fell $122.9 million to $289.9 million, primarily due to lower sales and a decline in adjusted gross profit.
LW Provides First-Quarter Insights by Segment
Net sales for the North America segment dropped 3% to $1,103.7 million, with a 4% decline in volume due to customer share losses and reduced U.S. restaurant traffic. Price/mix increased 1%, benefiting from inflation-driven pricing actions for large and regional chain restaurant contracts in fiscal 2024.
However, this was partially offset by unfavorable channel and product mix, along with targeted investments in pricing and trade support aimed at attracting and retaining volume across all sales channels. North America Segment Adjusted EBITDA fell $103.3 million to $276.1 million, primarily due to higher manufacturing costs per pound, a charge for the voluntary product withdrawal and lower sales volumes, partially offset by gains from pricing actions.
Net sales for the International segment rose 4% to $550.4 million, despite a 1% decline in volume. The volume decrease was caused by the company's prior decision to exit lower-priced and lower-margin business in Europe to optimize customer and product mix, along with the impact of a voluntary product withdrawal.
However, growth in key international markets outside Europe helped offset the decline. Price/mix increased 5% due to pricing actions taken this fiscal year to combat input cost inflation. International Segment Adjusted EBITDA dropped $39.1 million to $50.5 million, primarily due to the voluntary product withdrawal and higher manufacturing costs per pound, though this was partially offset by inflation-driven pricing benefits.
Lamb Weston’s Financial Health Snapshot
The company ended the quarter with cash and cash equivalents of $120.8 million, long-term debt and financing obligations (excluding the current portion) of $3,437.3 million and total shareholders’ equity of $1,836.7 million.
The company generated $330.2 million as net cash from operating activities for 13 weeks ended Aug. 25, 2024, wherein capital expenditures amounted to $335.6 million.
Management paid out dividends worth $52 million and repurchased $82 million worth of stocks in the quarter. The company has shares worth $308 million remaining under its current buyback plan.
Lamb Weston Implements Restructuring Plan
The company is rolling out a restructuring plan aimed at enhancing operational and cost efficiencies while improving cash flow and enabling continued strategic investments for long-term value creation. Key elements of the plan include the permanent closure of its Connell, WA manufacturing facility, effective Oct. 1, 2024, temporary curtailment of specific production lines across North America and a reduction in operating expenses. This includes a 4% reduction in the global workforce and the elimination of certain unfilled positions. In addition, capital expenditures for fiscal 2025 will be reduced $100 million, lowering the estimate to $750 million from $850 million. The company expects the restructuring plan to generate around $55 million in pre-tax cost savings and reduce working capital in fiscal 2025.
Image Source: Zacks Investment Research
What to Expect From LW in FY25?
The company reaffirmed its fiscal 2025 net sales target of $6.6 billion to $6.8 billion, representing growth of approximately 2% to 5% on a constant currency basis, with volume increases expected to be the primary driver of sales growth.
The company anticipates achieving the low end of its adjusted EBITDA target range of $1,380 million to $1,480 million. Higher manufacturing costs per pound, net of restructuring savings, less favorable product mix and slightly higher-than-expected investments in pricing and trade are expected to offset reductions in adjusted SG&A expenses.
The company lowered its adjusted SG&A target range to $680-$690 million, down from $740 million to $750 million, caused by cost savings from the Restructuring Plan, including headcount reductions across commercial and support functions, the elimination of certain unfilled positions and additional savings initiatives not linked to the restructuring efforts.
The company lowered its adjusted net income target range to $600-$615 million and adjusted EPS to $4.15-$4.35, reflecting reduced adjusted EBITDA guidance range. The adjustment also accounts for increased estimates for interest expenses and the effective tax rate for the full year. Previously, the company projected adjusted net income of $630 million to $705 million and adjusted EPS of $4.35 to $4.85 for fiscal 2025.
The company anticipates an interest expense of around $185 million, depreciation and amortization expenses of approximately $375 million and an effective tax rate of about 25%.
Shares of this Zacks Rank #5 (Strong Sell) company have lost 21.5% in the past three months against the industry’s 8.8% growth.
Some Better-Ranked Staple Bets
Here, we have highlighted three better-ranked food stocks — The Chef's Warehouse (CHEF - Free Report) , Flowers Foods (FLO - Free Report) and McCormick & Company, Inc. (MKC - Free Report) .
The Chef’s Warehouse, which distributes specialty food products, currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
CHEF has a trailing four-quarter earnings surprise of 33.7%, on average. The Zacks Consensus Estimate for The Chef’s Warehouse’s current fiscal year sales and earnings each indicates growth of 9.7% and 12.6%, respectively, from the year-ago reported numbers.
Flowers Foods, one of the largest producers of packaged bakery foods in the United States, currently carries a Zacks Rank #2. FLO has a trailing four-quarter earnings surprise of 1.9%, on average. The Zacks Consensus Estimate for Flowers Foods’ current financial-year sales and earnings implies growth of around 1% and 5%, respectively, from the year-ago reported numbers.
McCormick is a leading manufacturer, marketer and distributor of spices, seasonings, specialty foods and flavors. It currently carries a Zacks Rank # 2. The Zacks Consensus Estimate for McCormick & Company’s current fiscal-year sales and earnings indicates advancements of 0.2% and 5.6%, respectively, from the year-ago reported figures. MKC has a trailing four-quarter earnings surprise of 8.3%, on average.