Lamb Weston Earnings: Cutting FVE on ERP Disruption and Slower Traffic, but Market Drop Excessive

Narrow-moat Lamb Weston reported disappointing fiscal 2024 third-quarter earnings. A disastrous rollout of a new ERP system led to incorrect estimates of inventory levels at distribution centers, leading to a drop in customer fulfillment rates, lost market share, and inventory write-offs. Additionally, the company cited sluggish restaurant traffic, which is expected to extend through the fourth quarter. These challenges lead us to cut our fiscal 2024 revenue and adjusted EBITDA forecasts by 5% and 7%, respectively, and, consequently, lower our fair value estimate to $110 per share from $120.