Key Stats for Lamb Weston Stock
- Price Change for Lamb Weston stock: -26%
- $LW Share Price as of Dec. 19: $43.94
- 52-Week High: $68.61
- $LW Stock Price Target: $64
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What Happened?
Lamb Weston (LW) stock crashed on Friday after the French fry maker held its full-year guidance unchanged despite solid second-quarter results.
The company reported Q2 sales growth of 1% and beat earnings expectations with adjusted EPS of $0.69. However, investors weren’t buying the optimism.
The problem wasn’t what happened last quarter. It was what management expects for the rest of the year.
By keeping revenue guidance flat and projecting adjusted EBITDA down 11% at the midpoint, the company essentially telegraphed weakness ahead. That implies either a soft third quarter, a weak fourth quarter, or both.
In Q2, Lamb Weston grew sales volume by 8% in North America and 7% internationally, which sounds great on the surface.
But pricing fell 8% in both markets due to a strong potato harvest and ongoing struggles in the quick-service restaurant industry.
The company is also ramping up its new production facility in Argentina, which is eating into margins as it works toward full utilization.
While management expects $100 million in cost savings this year and $250 million by 2028, those future benefits didn’t soften the blow of weaker near-term guidance.
See analysts’ growth forecasts and price targets for LW stock (It’s free!) >>>
What the Market Is Telling Us About LW Stock
The brutal selloff in Lamb Weston stock reflects deep concern about profitability and the company’s ability to defend pricing.
Investors are worried that weak restaurant traffic and increased competition could pressure margins for longer than expected.
The shares are now trading at their lowest level since March 2020 and down 60% from their 2023 peak.
Analysts noted that EBITDA margins came in below consensus and that the unchanged full-year guide implies second-half results below expectations despite first-half outperformance. That disconnect between strong volume growth and weak pricing power is troubling.
Still, bulls might argue Lamb Weston stock could be a value opportunity if the company successfully converts its heavy capital spending into market share gains.
With $900 million in cash from operations and an enterprise value of around $12.2 billion, the stock trades at roughly 13 times cash flow.
If revenue growth returns and cost savings materialize, the ongoing selloff could look overdone in hindsight.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
