S&P 500 slips, but losses kept in check as Nvidia climbs ahead of results
On Friday, Stifel analysts adjusted their outlook on Lamb Weston Holdings Inc . (NYSE:LW), reducing the company’s price target from $68.00 to $63.00, while reaffirming a Hold rating on the stock. The company’s shares, currently trading at $59.57, have shown remarkable resilience with a 10.29% gain over the past week. According to InvestingPro data, four analysts have recently revised their earnings expectations downward for the upcoming period. This move follows Lamb Weston’s third-quarter earnings release, which surpassed expectations, including a 4% increase in North America’s organic sales and a 6% rise in EBITDA to $364 million—$62 million higher than Stifel’s forecast. The improved financial performance was attributed to stronger volume growth and gross margin results compared to analysts’ estimates.
Despite the positive developments, Lamb Weston experienced a 530 basis point contraction in gross margin on a year-over-year basis, adjusted for unique costs from the previous year. These unique costs included the write-off of excess potatoes and expenses related to enterprise resource planning (ERP). The margin contraction was primarily due to lower capacity utilization and price investments made by the company. InvestingPro analysis shows the company maintains a healthy financial position with a current ratio of 1.35, indicating liquid assets exceed short-term obligations, and an Altman Z-Score of 3.09, suggesting financial stability.
Lamb Weston also reaffirmed its outlook for fiscal year 2025, prompting Stifel analysts to make a slight upward revision in their EBITDA projection for the company. The new estimate stands at $1.19 billion, an increase of $16 million from the prior forecast. However, this revised estimate also anticipates a weaker contribution from Lamb Weston in the fourth quarter of the fiscal year.
In light of these factors, Stifel has adjusted the price target for Lamb Weston shares to reflect a more conservative EBITDA estimate for fiscal year 2026. The Hold rating suggests that the analysts see the stock as fairly valued at its current price, with no strong indicators for either buying or selling at this time. Lamb Weston, known for its frozen potato products, continues to navigate the challenges and opportunities within the food processing industry. InvestingPro analysis indicates the stock is currently undervalued based on its Fair Value model, with additional ProTips and comprehensive analysis available in the Pro Research Report, which provides deep-dive analysis of this and 1,400+ other US stocks.
In other recent news, Lamb Weston Holdings Inc. reported its third-quarter earnings for fiscal year 2025, surpassing market expectations with an earnings per share of $1.10, exceeding the forecast of $0.89. The company also reported revenue of $1.52 billion, which was higher than the anticipated $1.5 billion. Despite this strong performance, Stifel analysts adjusted their outlook, reducing the price target for Lamb Weston from $68.00 to $63.00 while maintaining a Hold rating. This adjustment reflects concerns over gross margin contraction and lower capacity utilization, despite the company’s reaffirmed financial outlook for fiscal year 2025.
Lamb Weston experienced a 4% increase in North America organic sales and an adjusted EBITDA of $364 million, surpassing expectations. However, the company faced a gross margin contraction of 530 basis points due to various factors, including lower capacity utilization and price investments. Stifel has also increased its EBITDA forecast for the company to $1.19 billion, up by $16 million from their prior estimate, though they expect a weaker contribution in the fourth quarter.
The company has provided a full-year revenue guidance of $6.35 to $6.45 billion and an adjusted EBITDA guidance of $1.17 to $1.21 billion. Lamb Weston has launched new products and expanded its brand portfolio, aiming for $55 million in pretax savings for FY2025. The company’s CEO, Mike Smith, emphasized a commitment to customers and operational efficiency, with plans to explore value creation opportunities. Despite challenges, including declining QSR traffic and economic uncertainty, Lamb Weston remains focused on optimizing its operations and improving profitability.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.