On Friday, Bernstein SocGen Group maintained its Market Perform rating on Lamb Weston (NYSE:LW) with a steady price target of $85.00, representing potential upside from the current trading price of $74.23. According to InvestingPro analysis, the stock appears undervalued based on its Fair Value assessment.
The firm highlighted potential challenges for the company in the upcoming quarter, specifically relating to gross margins, which are anticipated to be lower than expected. Analysts predict that Lamb Weston's gross margins will fall to 22.4%, compared to the consensus estimate of 24.5%.
The analysis pointed to several factors that could pressure the company's financial performance, including higher inventory costs, an unfavorable price/mix in North America, and deleveraging effects. These issues are expected to have a significant impact on Lamb Weston's results for the next quarter, which ends on February 29, 2025.
Lamb Weston's earnings per share (EPS) for the quarter are also estimated to come in below the consensus. The firm forecasts an EPS of $0.86, which is $0.19 less than the consensus estimate of $1.05. This discrepancy suggests that the company may face headwinds that could affect its profitability.
In light of these projections, there is concern that Lamb Weston may need to revise its guidance for the fiscal year 2025 downward. The company's current financial outlook could be at risk if the anticipated challenges materialize and negatively affect its financial results.
The analysis from Bernstein SocGen Group serves as an early indicator for investors regarding Lamb Weston's potential financial performance in the near term. It underscores the importance of gross margin figures as a key metric for the company's health and profitability.
In other recent news, Lamb Weston Holdings Inc (NYSE:LW). has been the focus of several significant developments. The company reported a slight 1% decline in total sales year-over-year for Q1 of fiscal year 2025, but exceeded sales expectations with an adjusted EBITDA of $290 million. Lamb Weston also inaugurated a new production plant in The Netherlands, which is expected to increase its annual production capacity by 195 million kilos.
Analyst firms have been active in their coverage of Lamb Weston. Deutsche Bank (ETR:DBKGn) initiated coverage with a Hold rating and a price target set at $81, while Bernstein assigned a Market Perform rating and a price target of $85. JPMorgan downgraded the stock from Overweight to Neutral due to concerns over restaurant demand and supply-demand dynamics. Citi and BofA Securities have raised their price targets to $90 and $80, respectively.
Lamb Weston has also attracted the attention of activist investors JANA Partners and Continental Grain, who have disclosed stakes of 5% and less than 1%, respectively. These firms intend to engage with Lamb Weston's board and management to discuss various issues, potentially including the sale of the company.
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