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On Friday, Stifel analysts revised their outlook on Lamb Weston Holdings Inc . (NYSE:LW), reducing the price target from $68.00 to $63.00 while upholding a Hold rating on the stock. The stock, currently trading at $59.57, has shown resilience with a notable 10.29% gain over the past week, though InvestingPro data reveals that 4 analysts have recently revised their earnings expectations downward for the upcoming period. The adjustment follows Lamb Weston’s third-quarter earnings release, which exceeded expectations with a 4% rise in North America organic sales and EBITDA reaching $364 million—a 6% increase that surpassed Stifel’s estimate by $62 million. This performance was attributed to stronger volume growth and gross margin results than anticipated.
Despite the positive quarter, Lamb Weston experienced a gross margin contraction of 530 basis points on a comparable basis. This was due to lower capacity utilization and price investments, as well as unique costs from the previous year such as the write-off of excess potatoes and expenses related to enterprise resource planning (ERP). Nevertheless, InvestingPro analysis indicates the company maintains a healthy financial position with a Current Ratio of 1.35, suggesting sufficient liquidity to meet short-term obligations.
Lamb Weston has reaffirmed its financial outlook for fiscal year 2025. In response, Stifel has slightly increased its EBITDA forecast for the company to $1.19 billion, which is an uptick of $16 million from their prior estimate. However, this updated projection includes an expectation of a weaker contribution in the fourth quarter.
The new price target of $63 takes into account Stifel’s revised EBITDA estimate for fiscal year 2026, which has been lowered in light of the recent developments. Despite the reduction in price target, the Hold rating suggests that Stifel analysts advise investors to maintain their current positions in Lamb Weston stock without further buying or selling at this time. According to InvestingPro Fair Value analysis, the stock appears undervalued at current levels, with additional insights available in the comprehensive Pro Research Report, which offers detailed 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, exceeding market expectations with an earnings per share (EPS) of $1.10, surpassing the forecasted $0.89. The company also outperformed revenue projections, reporting $1.52 billion against the expected $1.5 billion. This marks a 4% year-over-year increase in net sales and a 9% rise in volume. Lamb Weston’s North America segment experienced a notable rise in adjusted EBITDA, while the international segment saw a decline. The company ended the quarter with liquidity of $1.1 billion and a net debt of $4.2 billion. Analysts from Barclays (LON:BARC) and Citi inquired about the company’s future strategies and inventory management during the earnings call. Additionally, Lamb Weston has engaged Alex Partners to explore value creation opportunities, focusing on operational efficiency and customer relations. The company remains optimistic about achieving $55 million in pretax savings for FY2025.
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