Lamb Weston Holdings Seeks Recovery Amid Market Challenges
With a market cap of $10.9 billion, Lamb Weston Holdings, Inc. (LW) is a leader in the production and distribution of frozen potato products like French fries. Based in Eagle, Idaho, the company caters to retail and food service customers worldwide, serving a broad array of restaurants and distributors.
Over the past year, LW shares have markedly underperformed the broader market. LW has declined 21.8% during this time, whereas the S&P 500 Index ($SPX) has gained 31.1%. In 2024, shares are down nearly 29%, significantly trailing the S&P’s increase of 24.7% year-to-date.
When compared to the Consumer Staples Select Sector SPDR Fund’s (XLP) 16.4% rise in the past year and 12.6% year-to-date return, LW’s performance appears even more concerning.
Positive Earnings Release Sparks Stock Increase
Lamb Weston’s stock price jumped nearly 3% after its Q1 2025 report on October 1, which revealed $1.7 billion in net sales that surpassed analyst expectations. The company’s adjusted earnings of $0.73 per share matched estimates. Alongside these results, LW introduced a restructuring plan that includes closing a costly processing plant and adjusting production schedules to better balance supply and demand in North America. This strategic shift, combined with reaffirming its revenue guidance of between $6.6 billion to $6.8 billion, helped alleviate some concerns regarding declining profits and weak demand for frozen potatoes.
Furthermore, on October 18, shares surged 10.2% following news that activist investor Jana Partners acquired a 5% stake in the company, advocating for operational improvements and a potential sale. Investors responded positively, anticipating that Jana’s involvement could enhance the company’s performance.
Earnings Projections and Analyst Ratings
For the fiscal year ending in May 2025, analysts project LW’s earnings per share (EPS) to decrease by 16.1% year-over-year, bringing it to $4.26. The company has had a mixed track record regarding earnings surprises, having met or exceeded consensus estimates in half of the last four quarters while falling short on two occasions.
Among the nine analysts following the stock, the current consensus rating is a “Moderate Buy” based on five “Strong Buy” recommendations and four “Holds.”
Price Target Adjustments Reflect Market Optimism
Notably, on October 22, Citi analyst Thomas Palmer raised his price target for Lamb Weston to $90, the highest benchmark among analysts, while maintaining a “Buy” rating. He cited potential growth from improved volume, better pricing, and the activism of Jana Partners, which suggests about a 17.3% upside from current levels.
The average price target now stands at $81.89, indicating a modest premium of just 6.7% over LW’s present stock price.
On the date of publication, Sohini Mondal did not hold any positions in the securities mentioned in this article. The information and data provided here are for informational purposes only. For additional details, please view the Barchart Disclosure Policy.
The views expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
