EAGLE, Idaho - Lamb Weston Holdings, Inc. (NYSE:LW), a global supplier of frozen potato products with a market capitalization of $11.2 billion, revealed a decline in its second-quarter fiscal 2025 earnings and updated its full-year financial targets. The company cited higher manufacturing costs and lower volumes as the primary reasons for the earnings shortfall. According to InvestingPro analysis, despite recent challenges, the company maintains strong financial health with a "GOOD" overall rating.
For the quarter ending November 24, 2024, Lamb Weston reported a net loss of $36.1 million, a significant downturn from the $215 million profit in the same period last year. The company's net sales decreased by 8% to $1,600.9 million, while income from operations plummeted by 94% to $18.5 million. Diluted earnings per share (EPS) also fell from a gain of $1.48 to a loss of $0.25. Despite these quarterly results, InvestingPro data shows the company maintains solid fundamentals with a P/E ratio of 18.5 and liquid assets exceeding short-term obligations.
On a non-GAAP basis, adjusted income from operations declined by 41% to $178.3 million, adjusted net income by 55% to $94.5 million, and adjusted diluted EPS by 54% to $0.66. Adjusted EBITDA saw a 25% decrease to $281.9 million.
The company's President and CEO, Tom Werner, acknowledged the results were below expectations, attributing the shortfall to higher-than-anticipated manufacturing costs and softer volumes. Werner also noted that challenging conditions are expected to persist throughout fiscal 2025 and into fiscal 2026, primarily due to capacity additions and softening global demand for frozen potatoes.
Lamb Weston has updated its fiscal 2025 outlook, reducing its net sales target to a range of $6.35 billion to $6.45 billion. The company's GAAP net income target has been adjusted to between $330 million and $350 million, with a diluted EPS target of $2.30 to $2.45. Adjusted EBITDA targets have also been revised to $1,170 million to $1,210 million, with adjusted net income expected to be between $440 million and $460 million and adjusted diluted EPS in the range of $3.05 to $3.20.
Despite the setbacks, Lamb Weston continues to implement cost-saving measures, including a restructuring plan announced on October 1, 2024, which involves the closure of a manufacturing facility and curtailment of production lines. The plan is expected to yield approximately $55 million in pre-tax cost savings and reduce working capital in fiscal 2025.
In the second quarter, Lamb Weston paid $51.6 million in cash dividends to its common shareholders. The company's board has approved an increase of $250 million in its share repurchase authorization, with approximately $558 million remaining authorized for repurchase. Additionally, a quarterly dividend of $0.37 per share has been declared, payable on February 28, 2025, to shareholders of record as of January 31, 2025. InvestingPro analysis highlights that Lamb Weston has raised its dividend for 8 consecutive years, with a current yield of 1.84% and impressive dividend growth of 28.6% over the last twelve months. For deeper insights into Lamb Weston's financial health and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.
This article is based on a press release statement.
In other recent news, Lamb Weston Holdings, Inc. announced the appointment of Michael J. Smith as its new President and CEO, effective January 3, 2025. Smith, currently the Chief Operating Officer, will also join the company's Board of Directors. In other developments, Post Holdings (NYSE:POST) confirmed its intention to acquire Potato Products of Idaho, a move that has been viewed as a strategic expansion into the consumer packaged goods sector. Amidst these changes, Lamb Weston's shares experienced a temporary drop. Additionally, JANA Partners, a major shareholder of Lamb Weston, has called for a substantial shake-up of the company's board and leadership, citing disappointment with recent performance. On the analyst front, Bernstein reaffirmed its Market Perform rating on Lamb Weston, following speculation about the potential acquisition by Post Holdings. These recent developments highlight a period of significant change and strategic moves for Lamb Weston.
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