Lamb Weston Holdings Inc LW

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$82.12 +1.12 (1.38%)

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As of Apr 22, 2024 11:00pm Delayed Price Pre-Open: $83.50 +1.00

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Company Report

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

Kristoffer Inton Apr 4, 2024

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.

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Price vs Fair Value

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LW is trading at a 25% discount.

Price

$82.12

Apr 22, 2024

Fair Value

$962.00

Apr 4, 2024

Uncertainty

Medium

1-Star Price: $851.30
5-Star Price: $33.00
Economic Moat: Nbbyqg
Capital Allocation: Pxtkgsqtz

Bulls Say, Bears Say

Bulls

Lamb Weston’s products generate high margins for restaurants, increasing their loyalty and willingness to pay for consistency and quality.

Bears

Poor execution, like the initial rollout of its new ERP system in fiscal 2024, can overshadow its competitive advantages and lead to lost market share and profit margin erosion.

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Trading Information

Previous Close Price: $81.00
Day Range: $80.84–82.50
52-Week Range: $77.41–117.38
Bid/Ask: $77.60 / $83.50
Market Cap: $11.86 Bil
Volume/Avg: 1 / 2.5 Mil

Key Statistics

Price/Earnings (Normalized): 14.60
Price/Sales: 1.79
Dividend Yield (Trailing): 1.46%
Dividend Yield (Forward): 1.75%
Total Yield: 2.96%

Company Profile

Lamb Weston is North America’s largest and the world’s second-largest producer of branded and private-label frozen potato products, both by volume and value. The company’s portfolio is anchored by French fries, but it also sells sweet potato fries, tater tots, diced potatoes, mashed potatoes, hash browns, and chips. Nearly 70% of revenue comes from its home market of North America, with none of the other 100 countries the company sells into representing a significant share. McDonald’s is Lamb Weston’s single largest customer at 13% of fiscal 2023 sales, with no other company representing more than 10%. Lamb Weston became an independent company in 2016 when it was spun off from Conagra.

Sector: Consumer Defensive
Industry: Packaged Foods
Stock Style Box: Mid Growth
Total Number of Employees: 10,300
Website: https://www.lambweston.com

Competitors

Valuation

Metric	LW	CAG	GIS
Price/Earnings (Normalized)	14.60	11.60	15.37
Price/Book Value	6.59	1.62	4.26
Price/Sales	1.79	1.23	2.07
Price/Cash Flow	10.89	8.06	12.76

Price/Earnings

CAG

GIS

Financial Strength

Metric	LW	CAG	GIS
Quick Ratio	0.44	0.29	0.33
Current Ratio	1.19	0.95	0.66
Interest Coverage	8.10	3.35	7.70

Quick Ratio

CAG

GIS

Profitability

Metric	LW	CAG	GIS
Return on Assets (Normalized)	12.40%	5.79%	8.71%
Return on Equity (Normalized)	57.00%	14.39%	27.32%
Return on Invested Capital (Normalized)	18.11%	8.83%	13.78%

Return on Assets

CAG

GIS

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