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On Wednesday, Citi reaffirmed its Buy rating for Lamb Weston Holdings Inc (NYSE:LW) stock, maintaining a $75.00 price target. The company reported first-quarter earnings for fiscal year 2025, slightly surpassing expectations with earnings per share (EPS) of $0.73, which was a cent higher than the consensus.
Sales exceeded forecasts by 6%, driven by a combination of pricing and volume, and a reduction in selling, general, and administrative expenses (SG&A) helped balance a lower gross margin.
Lamb Weston, known for its frozen potato products, confirmed its sales forecast for fiscal year 2025 but adjusted its expectations for both EPS and earnings before interest, taxes, depreciation, and amortization (EBITDA) downward, indicating a revised gross margin outlook as the primary reason. The company also declared the immediate closure of its Connell, Washington facility and the temporary suspension of production lines at other locations.
The announcement came ahead of the company's earnings call, scheduled for tomorrow at 10 AM ET, where more details are anticipated. According to Citi's analysis, the market may prioritize the revised earnings guidance in the upcoming discussions, as it appears to suggest intensified pricing competition within the industry.
Moreover, while the plant closure may not come as a surprise, as it was previously discussed as a possibility, Citi views Lamb Weston's actions to shut down the plant and reduce production as positive steps towards increasing industry utilization rates. These strategic moves are seen as efforts to improve operational efficiency amid the current market challenges.
In other recent news, Lamb Weston Holdings, Inc. has made significant strides in its financial and leadership structure. The company secured an additional $500 million term loan, referred to as the Term A-5 Loan, which was immediately utilized to repay the company's existing Term A Loan in full. Lamb Weston also welcomed Norman Prestage to its Board of Directors and appointed Sylvia Wilks as its new Chief Supply Chain Officer.
In terms of analyst outlooks, TD Cowen maintained a Hold rating on Lamb Weston shares while raising the price target to $65.00. However, Wells Fargo revised its price target for Lamb Weston to $70.00 due to decreased sales forecasts, and Citi also raised its price target to $75.00, maintaining a Buy rating.
These are recent developments indicating the evolving business landscape for Lamb Weston. Despite some analysts downgrading their outlook, robust earnings per share (EPS) forecasts remain, with projections of 5.48 for FY1 and 6.54 for FY2.
As the company prepares to release its fiscal first-quarter 2025 results, firms like Citi and TD Cowen express cautious optimism, awaiting further signs of favorable alignment in the market's supply and demand dynamics.
InvestingPro Insights
Recent InvestingPro data provides additional context to Lamb Weston's financial position and market performance. The company's P/E ratio of 12.92 suggests it's trading at a relatively low earnings multiple, which aligns with one of the InvestingPro Tips. This could indicate potential value for investors, especially considering the recent stock price decline.
Lamb Weston's revenue growth of 20.88% over the last twelve months demonstrates strong top-line performance, despite the recent quarterly revenue decline of 4.9%. The company's dividend yield of 2.22% and impressive dividend growth of 28.57% over the last twelve months highlight its commitment to shareholder returns, even as it navigates industry challenges.
InvestingPro Tips also point out that Lamb Weston has raised its dividend for 8 consecutive years, which may appeal to income-focused investors. Additionally, the company's liquid assets exceeding short-term obligations suggest a solid financial foundation, which could be reassuring given the recent facility closure and production line suspensions.
For investors seeking a more comprehensive analysis, InvestingPro offers 6 additional tips for Lamb Weston, providing deeper insights into the company's financial health and market position.
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