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NEW YORK - JANA Partners, an investment firm holding over 5% of Lamb Weston Holdings, Inc. (NYSE:LW), has called for significant changes to the company's board and leadership. The firm, one of Lamb Weston's largest shareholders, expressed its concerns in a letter following a recent earnings report that reflected poorly on the company's financial performance. According to InvestingPro data, the company's revenue declined 0.33% in the last twelve months, while four analysts have recently revised their earnings expectations downward.
Lamb Weston, known for its frozen potato products, saw its stock plunge by 20% after announcing a substantial cut to its fiscal 2025 guidance on December 19, 2024. This drop in stock price brought the shares near a 52-week low of $52.99, with the stock down over 40% in the past year. JANA Partners criticized the board for what it sees as a superficial CEO change and a failure to acknowledge the need for more profound transformations within the company. Get deeper insights into Lamb Weston's performance metrics and more with a comprehensive Pro Research Report, available exclusively on InvestingPro.
The investment firm highlighted feedback from a shareholder perception study, which involved approximately 70% of the top 70 Lamb Weston shareholders. The study revealed strong dissatisfaction with the company's management, operational execution, and capital allocation. With a current P/E ratio of 24.36 and a Price/Book ratio of 5.43, the company trades at relatively high multiples despite its operational challenges. Despite high product quality ratings, shareholders expressed a loss of confidence in the board and leadership's ability to manage the company effectively.
JANA Partners, known for working constructively with boards to drive change, has offered to join Lamb Weston's board to help address the company's issues and improve long-term value. The firm suggests that if the current board is unwilling to make the necessary changes, Lamb Weston should consider a sale transaction.
This push for change comes after Lamb Weston experienced a significant decline in market capitalization, which JANA attributes to over $6 billion in value destruction. The company's current market cap stands at $8.86 billion, with an EBITDA of $1.2 billion in the last twelve months. The firm's managing partner, Scott Ostfeld, signed the letter, emphasizing the urgency for a new direction at the company. Access comprehensive financial analysis and more exclusive insights about Lamb Weston through InvestingPro's detailed research tools.
The information in this article is based on a press release statement from JANA Partners.
In other recent news, Lamb Weston has seen significant developments. The company announced the appointment of Michael J. Smith as its new President and CEO, effective from January 3, 2025. Smith, who has been with Lamb Weston since 2011 and served as COO since May 2023, will succeed Thomas P. Werner. Furthermore, activist investor Jana Partners is considering Jeffery DeLapp, a former president of Lamb Weston under ConAgra Foods (NYSE:CAG)' ownership, as a potential director candidate.
On the financial front, Lamb Weston's recent quarter fell short of expectations, with a 25% drop in EBITDA to $282 million and sales that did not meet projections. Consequently, the company revised its future earnings guidance downward, anticipating a weaker second half in terms of revenue. Various financial services firms, including Stifel, Deutsche Bank (ETR:DBKGn), and Citi, have adjusted their outlooks on Lamb Weston, reducing their price targets while maintaining a Hold or Neutral rating.
Bernstein SocGen Group maintained its Market Perform rating on Lamb Weston despite disappointing earnings and a lower gross margin than expected. Lamb Weston is also embarking on a restructuring plan and reducing its capacity footprint in response to these challenges. These are the latest developments in Lamb Weston's business operations and financial performance.
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