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Investing.com - JPMorgan has assumed coverage on Lamb Weston (NYSE:LW) with a Neutral rating and lowered the price target to $57.00 from $66.00. According to InvestingPro data, the stock currently trades below its Fair Value, with analysts’ targets ranging from $58 to $80.
The investment bank sees potential for margin improvement in the coming years through internal efficiencies at the potato processor. With current gross profit margins at 22.85% and EBITDA of $1.26 billion, there’s room for optimization. JPMorgan also expects the french fry industry to grow faster than most U.S.-centric large-cap packaged food companies over time.
Despite these positive factors, the firm expressed difficulty being "overly constructive" on Lamb Weston shares currently due to two main concerns.
First, JPMorgan believes industry potato processing capacity additions will likely outpace demand growth next year and potentially longer. This supply-demand imbalance could pressure the company’s performance.
Second, the firm noted that Lamb Weston’s free cash flow "remains constrained by elevated cap ex" specifically related to environmental requirements, further limiting its investment appeal.
In other recent news, Lamb Weston has reported impressive fourth-quarter earnings for fiscal year 2025, surpassing both earnings and revenue forecasts. The company achieved an earnings per share (EPS) of $0.87, significantly higher than the anticipated $0.64, and reported revenue of $1.68 billion, exceeding the forecasted $1.59 billion. Analysts have responded positively to these results, with Stifel raising its price target to $61, citing a strong EBITDA performance that exceeded their estimates by $33 million. Bernstein also increased its price target to $62, highlighting effective cost containment measures and strong volume growth. Jefferies took a similar stance, raising its target to $67, noting the company’s strategic price investments in North America. These developments indicate robust operational performance and strategic initiatives that have been well-received by the market.
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