To The Moon

$Lamb Weston Holdings, Inc.(LW)$ is expected to release its quarterly earnings result for fiscal Q3 2025 on 03 April 2025 before the market open.

LW is expected to report a decline in its bottom line, with the consensus estimate for earnings per share to come in at 86 cents, this have been reducing for the past 30 days, this would be a 27.5% decline compared to same quarter last year.

The consensus estimate for the upcoming quarter revenue is anticipated to come in $1.50 billion, which is an 2.9% growth from same period last year.

Lamb Weston (LW) Last Neutral Earnings Call Saw Price Decline By 31.43%

LW last neutral earnings call on 19 Dec 2024 saw its share price decline by 31.43%.

The earnings call revealed significant challenges with declining sales, increased competition, and manufacturing inefficiencies, but also highlighted proactive measures like leadership transition, cost-saving restructuring plans, and capital expenditure reductions. The sentiment reflects a balanced approach with both strategic adjustments to address current challenges and initiatives to enhance shareholder value.

Lamb Weston (LW) Guidance On International Markets

In the Lamb Weston second quarter fiscal year 2025 earnings call, the company adjusted its financial guidance downward due to a challenging operating environment and competitive pressures. Net sales for the year are now expected to range from $6.35 billion to $6.45 billion, reduced from the previous estimate of $6.6 billion to $6.8 billion. Adjusted EBITDA guidance was also lowered to a range of $1.17 billion to $1.21 billion, down from around $1.38 billion previously. This revision reflects a decline in net sales by 8% and volume by 6% compared to the same quarter last year, primarily due to decreased restaurant traffic and heightened competition. The company also faces a more competitive pricing environment, particularly in international markets. Despite these challenges, Lamb Weston is targeting $750 million in capital expenditures for fiscal 2025 and maintaining a leverage ratio target of 3.5x.

Key Factors Impacting Fiscal Q3 2025 Earnings:

Commodity Costs

Potatoes/Oil Prices: Volatility in potato yields (due to weather or supply chain issues) or cooking oil prices (linked to global vegetable oil markets) could squeeze margins. Stable or lower input costs would likely improve profitability.

Lamb Weston plans to significantly reduce capital spending, targeting approximately $750 million for fiscal 2025 and $550 million for 2026.

Demand Dynamics

Restaurant Recovery: As a major supplier to foodservice, LW’s performance ties to restaurant traffic. Sustained post-pandemic demand for dining out would boost sales.

Retail vs. Foodservice Mix: Shifts toward at-home consumption might require LW to adjust its channel strategy, impacting pricing and volume.

Operational Efficiency

Supply Chain Stability: Resolved labor shortages or transportation bottlenecks could enhance production and distribution efficiency, supporting margins.

Higher manufacturing costs per pound and inefficiencies associated with lower production and utilization rates impacted gross profit.

Capacity Investments: New facilities or technology upgrades (e.g., automation) might reduce long-term costs but incur short-term expenses.

The company announced a $250 million increase in its share repurchase authorization, bringing the total to approximately $560 million. Lamb Weston declared a $0.01 increase in its quarterly dividend to $0.37 per share.

Adjusted EBITDA fell by $95 million to $282 million due to unfavorable price/mix, higher manufacturing costs, and inefficiencies.

International Markets

Global Expansion: Growth in emerging markets or currency fluctuations (e.g., a strong USD dampening overseas revenue) could affect results.

Competitive Landscape

Market Share: Aggressive pricing by competitors (e.g., McCain Foods) or innovations in product offerings (e.g., plant-based alternatives) might pressure LW’s positioning.

Sales in the International segment declined by 6% due to competitive pressures, share losses, and softer restaurant traffic in key markets.

Regulatory/Trade Risks

Tariffs/Trade Policies: Changes in international trade agreements or tariffs (e.g., EU import rules) could impact export costs.

Macroeconomic Conditions

Inflation/Consumer Spending: High inflation may reduce discretionary spending on dining out, while economic resilience could sustain demand.

Net sales declined by 8% and volume declined by 6% year-over-year, primarily due to declining restaurant traffic and competitive pressures. The company reduced its net sales target range to $6.35 billion to $6.45 billion and adjusted EBITDA target range to $1.17 billion to $1.21 billion for the year.

Company-Specific Developments

M&A Activity: Acquisitions (e.g., recent deals to expand product lines) might drive revenue growth but also integration costs.

Thomas Werner announced he will step down as CEO, and Mike Smith, the current COO, will become the new President and CEO starting January 3, 2025.

Guidance Updates: Management’s prior outlook for FY2025 (e.g., raised/lowered forecasts in Q2) would set expectations.

The company is on track to deliver $55 million in cost savings for fiscal 2025 and $85 million in annualized savings for 2026 through restructuring efforts.

Lamb Weston (LW) Price Target

Based on 6 Wall Street analysts offering 12 month price targets for Lamb Weston Holdings in the last 3 months. The average price target is $62.00 with a high forecast of $69.00 and a low forecast of $55.00. The average price target represents a 16.30% change from the last price of $53.31.

Considering that LW already faced competitive pricing in the international market, with the tariffs coming up soon, this might further drag LW into more challenges on its cost control and also the sales in the international market. So I am expecting LW to trend towards the lower price target range.

Technical Analysis - Exponential Moving Average (EMA)

LW have been trading cautiously by staying traded along the 12-EMA and 26-EMA, and RSI is showing modest momentum, this could be due to the reason of tariffs impact is significant for LW business both in the domestic and international market.

We can see that LW is already facing pricing challenges, so with tariffs coming either in the sectors or by countries it will still hit LW.

So I think LW might not be able to make any daily uptrend move as the bulls might be waiting for clearer message from the tariffs before attempting to make a daily uptrend expansions.

These could be the two scenarios played out for LW earnings.

Bull Case: Stable input costs + robust restaurant demand + operational efficiency → earnings beat.

Bear Case: Commodity spikes + reduced dining-out spending + competitive pressures → earnings miss.

Summary

Lamb Weston’s Q3 2025 earnings will likely reflect its ability to navigate input cost volatility, sustain demand in key markets, and execute operational strategies.

We might want to watch out for management commentary on guidance, cost controls, and macroeconomic headwinds/tailwinds.

Appreciate if you could share your thoughts in the comment section whether you think LW could be able to navigate the cost controls to reduce its competitive pricing challenges.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.