Lamb Weston’s 2Q Tops Analysts’ Estimates; Jefferies Lifts PT


Lamb Weston Holdings reported better-than-expected 2Q results and reinitiated its share repurchase program.

Lamb Weston’s (LW) 2Q revenues of $896.1 million surpassed analysts’ expectations of $877.9 million but declined 12% on a year-on-year basis. The food processing company’s earnings fell 31% to $0.66 per share year-over-year but came ahead of the Street’s estimates of $0.62.

The company’s quarterly results were negatively impacted by the COVID-19 pandemic-led restrictions imposed by the government on restaurants and cold weather conditions which have been hurting outdoor dining traffic across the US.

Lamb Weston also provided a business update for the third quarter for the four weeks ended December 27. The company noted that North American and Europe shipments, both remained at approximately 85% of the year-ago quarter’s level. The company expects the shipments across the regions to remain soft during the remainder of the quarter. (See LW stock analysis on TipRanks)

Additionally, Lamb Weston announced that it is planning to resume its share repurchase program in 3Q, which had been suspended in late fiscal 2020 due to the pandemic-led operating environment.

Following the earnings release, Jefferies analyst Robert Dickerson raised the stock’s price target to $80 (5.7% upside potential) from $74 but maintained a Hold rating.

In a note to investors, Dickerson wrote, “Given a pressured Q3 should have been somewhat known, Q4 should be the return to growth, and mgmt. remains hopeful that restaurant traffic and fry demand could return to pre-pandemic levels later this year, the momentum in Lamb’s stock (in theory) could easily continue, as long as the pricing and competitive backdrop remains stable that is. We still simply find much of the easier upside already baked into the stock with valuation ripe.”

Overall, the consensus among analysts is a Moderate Buy based on 1 Buy rating versus 1 Hold rating. The average price target of $84.50 implies upside potential of around 11.6% over the next 12 months. Shares have plunged about 17% over the past year.

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