Lamb Weston (LW) Down 6.7% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for Lamb Weston (LW). Shares have lost about 6.7% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Lamb Weston due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Lamb Weston's Q4 Earnings Beat, Sales Rise 4% Y/Y

Lamb Weston reported solid fourth-quarter fiscal 2025 results, wherein both the top and bottom lines beat the Zacks Consensus Estimate and increased year over year.

LW’s adjusted earnings were 87 cents per share, beating the Zacks Consensus Estimate of 64 cents. The increase of 12% was primarily driven by lower income tax expense resulting from reduced adjusted gross profit, partially offset by lower adjusted equity method investment earnings.

Net sales amounted to $1,675.8 million, beating the Zacks Consensus Estimate of $1,593 million. The top line increased 4% year over year.

LW’s Quarterly Results: Key Metrics & Insights

Lamb Weston’s fiscal fourth-quarter volume rose 8% compared with the same quarter last year.

However, the price/mix dipped 4% due to the company’s strategic efforts to partner with customers on pricing and trade promotions in response to an increasingly competitive environment across both the North America and International segments. We expected the price/mix to decline 2.7% in the quarter.

The adjusted gross profit decreased $19.5 million, reaching $343.5 million. This decline was mainly caused by a negative price/mix, which was partially offset by lower manufacturing costs per pound. The improvement in manufacturing costs reflected the lapping of an approximately $40 million negative impact from the prior-year voluntary product withdrawal, as well as lower raw potato costs in the current year.

Adjusted selling, general and administrative (SG&A) expenses fell $16.4 million year over year, totaling $155.6 million, associated with the lower advertising and promotion expenses, lapping of increased expenses related to the ERP transition in the prior-year quarter and cost savings from the company’s fiscal 2025 Restructuring Plan. These were somewhat offset by the timing of compensation accruals.

Adjusted EBITDA rose $1.5 million year over year, reaching $284.9 million. This growth was driven by reduced adjusted SG&A expenses, partially offset by a decline in adjusted gross profit.

LW Provides Q4 Insights by Segment

Net sales for the North America segment, which covers customers in the United States, Canada and Mexico, were down 1%, reaching $1,103.1 million compared with the prior-year quarter. Sales volume rose 4%, driven by gains with regional, small and retail customers. These gains were partially offset by low single-digit declines in restaurant traffic.

The price/mix of the segment fell 5%, reflecting planned investments in pricing and trade to remain competitive in an increasingly challenging market. This decline was partially offset by favorable channel and product mix, supported by growth in regional, small and retail channels. The North America segment’s adjusted EBITDA declined in the range of $18.6 million to $257.9 million.

Net sales for the International segment, which includes all customers outside North America, grew 15% to $572.7 million. Volume rose 16%, reflecting growth across all regions and the lapping of the prior-year voluntary product withdrawal. These gains were partially offset by a decline in restaurant traffic in the United Kingdom and relatively flat traffic in other major international markets.

The price/mix of the segment declined 1% due to a continued competitive environment. International segment adjusted EBITDA rose in the range of $22.2 million to $62.6 million.

Lamb Weston’s Financial Health Snapshot

The company ended the quarter with cash and cash equivalents of $70.7 million, long-term debt and financing obligations (excluding the current portion) of $3,682.8 million and total shareholders’ equity of $1,737.7 million.

The company generated $868.3 million as net cash from operating activities for the 52 weeks ending May 25, 2025, wherein capital expenditures, net of proceeds from blue chip swap transactions, amounted to $650.7 million.

In fiscal 2025, Lamb Weston returned $488.9 million to its shareholders through cash dividends and share repurchases. This includes $206.9 million in cash dividends and $282 million in share repurchases. In total, the company repurchased 4,867,449 shares during fiscal 2025. As of fiscal year-end, approximately $358 million remained authorized and available for repurchases under the program.

What to Expect From LW in FY26?

The company expects its annual net sales target range to be $6.35-$6.55 billion. Lamb Weston anticipates an adjusted EBITDA in the range of $1,000 million to $1,200 million. Capital expenditures are expected to total approximately $500 million.

How Have Estimates Been Moving Since Then?

Since the earnings release, investors have witnessed a downward trend in estimates revision.

The consensus estimate has shifted -34.47% due to these changes.

VGM Scores

Currently, Lamb Weston has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a score of B on the value side, putting it in the second quintile for value investors.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Lamb Weston has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.

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This article originally published on Zacks Investment Research (zacks.com).

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