On Thursday, Stifel maintained a Hold rating on Lamb Weston (NYSE:LW) stock and increased the price target to $65 from $60. This adjustment follows Lamb Weston's first-quarter earnings report, which surpassed expectations. Despite a 30% drop in EBITDA to $289.9 million, the figure was $17 million above Stifel's projections, bolstered by robust revenue performance.
Lamb Weston has unveiled a restructuring initiative in response to the current supply and demand imbalance. This plan includes the shutdown of one facility and the scaling back of production on several lines. These measures are expected to enhance utilization by approximately 5%, with overall utilization anticipated to rise to high-single digits when taking temporary production curtailments into account.
The company has confirmed its revenue forecast, which now likely reflects an increased growth projection for its international segment. However, Lamb Weston has adjusted its EBITDA outlook to the lower end of the initial range, factoring in rising production costs. The capacity reductions are seen as a move that could support price stabilization, although prices are anticipated to remain under pressure until fiscal year 2026 as Lamb Weston seeks to secure more business through investment.
The revised price target of $65 reflects these developments as well as the firm's continued Hold stance on the stock.
InvestingPro Insights
Lamb Weston's recent financial performance and strategic moves align with several key insights from InvestingPro. Despite the company's recent challenges, including the 30% drop in EBITDA, InvestingPro data shows that Lamb Weston remains profitable, with a P/E ratio of 15.24. This suggests that the market is still pricing in future growth potential, even as the company navigates current headwinds.
An InvestingPro Tip highlights that Lamb Weston has raised its dividend for 8 consecutive years, demonstrating a commitment to shareholder returns even in challenging times. This is further supported by the current dividend yield of 2.16% and a significant dividend growth of 28.57% over the last twelve months.
The restructuring initiative announced by Lamb Weston appears timely, given another InvestingPro Tip indicating that the stock price has fallen significantly over the last three months. In fact, the 3-month price total return stands at -18.98%, suggesting that the market has been adjusting to the company's evolving outlook.
For investors seeking a more comprehensive analysis, InvestingPro offers 5 additional tips that could provide further insights into Lamb Weston's financial health and market position.
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