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Why Is Lamb Weston (LW) Up 7.8% Since Last Earnings Report?
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It has been about a month since the last earnings report for Lamb Weston (LW - Free Report) . Shares have added about 7.8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Lamb Weston due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Lamb Weston Beats Earnings in Q4, Sales Improve Y/Y
Lamb Weston delivered impressive fourth-quarter fiscal 2019 results, with the top and the bottom line growing year over year and beating the Zacks Consensus Estimate. Sturdy performance in the Global and Foodservice units boosted the quarterly results. Moreover, management provided an optimistic view for fiscal 2020.
Quarter in Detail
In fiscal fourth quarter, adjusted earnings of 74 cents surpassed the Zacks Consensus Estimate of 72 cents and rose 14% year over year. The upside was backed by higher income from operations as well as gains from lower taxes and BSW acquisition.
Net sales advanced 9% to $1,003.4 million, which surpassed the consensus mark of $967.5 million. Volumes grew 6% on the back of strength in the Global segment. Further, price/mix improved 3% owing to solid pricing strategies and better mix.
Gross profit increased 7.6% to $250.5 million, backed by price mix, greater volumes and savings from supply-chain efficiency. These were somewhat countered by higher transportation, input and manufacturing costs. Further, gross profits were hurt by by costs worth $3 million related to the company’s new french fry production line in Oregon.
SG&A expenses increased 3.3% to reach $102.5 million due to higher IT and infrastructure-related costs as well as greater sales and marketing investments. However, advertising and promotional costs declined year over year.
Adjusted EBITDA (including unconsolidated joint ventures) increased 6% to $215.4 million, driven by higher operating income and benefits from BSW acquisition.
Segment Analysis
Sales in the Global segment grew 13% to $526.5 million, courtesy of better price/mix and higher volumes. Volumes increased 10% on strong sales to strategic consumers in the United States and core international regions as well as gains from limited time product offerings (or LTOs). Price/mix increased 3%, courtesy of pricing adjustments in multi-year contracts. Product contribution margin in the segment increased 11% to $110.7 million, backed by higher volumes, supply chain efficiencies and price/mix gains. These were partially countered by high input, transportation and manufacturing costs.
Foodservice sales increased 7% to $313.1 million on the back of improved price/mix. The upside was driven by consistent favorable impact of strategic pricing actions undertaken in the last year and better mix. Moreover, volumes inched up 1% on the back of branded products growth. Product contribution margin rose 16% to $108.3 million, owing to improved price/mix and supply chain efficiencies that compensated for higher costs.
In the Retail segment, sales went up 3% to $129.2 million. The upside can be attributed to volume growth of 4%, stemming from increased branded and private label products sales. However, price/mix dropped 1% due to higher trade support. Product contribution margin inched down 1% to $21 million, thanks to lower price/mix.
Other Financial Details
Lamb Weston ended the quarter with cash and cash equivalents of $12.2 million, long-term debt (excluding current portion) of $2,280.2 million and total shareholders’ deficit of $4.6 million. The company generated $680.9 million as net cash from operating activities during fiscal 2019. Capital expenditures for the fiscal amounted to $334.2 million, majority of which were due to the construction of new production line in Oregon.
In fiscal 2019, the company returned almost $145.1 million through dividends and share repurchases. At the end of the quarter, the company had $218.2 million remaining under its $250-million share repurchase authorization.
Guidance
Management is pleased with its quarterly results, which reflects that its strategic endeavors are yielding well. Going ahead, management expects favorable market conditions to prevail and fuel performance. Moreover, it expects consistent gains from volumes and price/mix, which are likely to mitigate the adverse impacts of input cost inflation. Further, expenses are anticipated to rise considerably due to planned investments undertaken to support upgrade of information systems. Nevertheless, in the long run, such well-chalked investment plans are likely to boost the company’s operating efficiencies.
That said, management issued a favorable outlook for fiscal 2020, considering the gains from 53rd week. It expects net sales to increase mid-single digits, driven by higher volumes and price/mix. Adjusted EBITDA (including unconsolidated joint ventures) is expected in the range of $950-$970 million. Interest costs are projected to be roughly $110 million. Further, the company plans to use cash of $275 million for capital expenditures.
How Have Estimates Been Moving Since Then?
Fresh estimates followed a downward path over the past two months.
VGM Scores
At this time, Lamb Weston has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Lamb Weston has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is Lamb Weston (LW) Up 7.8% Since Last Earnings Report?
It has been about a month since the last earnings report for Lamb Weston (LW - Free Report) . Shares have added about 7.8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Lamb Weston due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Lamb Weston Beats Earnings in Q4, Sales Improve Y/Y
Lamb Weston delivered impressive fourth-quarter fiscal 2019 results, with the top and the bottom line growing year over year and beating the Zacks Consensus Estimate. Sturdy performance in the Global and Foodservice units boosted the quarterly results. Moreover, management provided an optimistic view for fiscal 2020.
Quarter in Detail
In fiscal fourth quarter, adjusted earnings of 74 cents surpassed the Zacks Consensus Estimate of 72 cents and rose 14% year over year. The upside was backed by higher income from operations as well as gains from lower taxes and BSW acquisition.
Net sales advanced 9% to $1,003.4 million, which surpassed the consensus mark of $967.5 million. Volumes grew 6% on the back of strength in the Global segment. Further, price/mix improved 3% owing to solid pricing strategies and better mix.
Gross profit increased 7.6% to $250.5 million, backed by price mix, greater volumes and savings from supply-chain efficiency. These were somewhat countered by higher transportation, input and manufacturing costs. Further, gross profits were hurt by by costs worth $3 million related to the company’s new french fry production line in Oregon.
SG&A expenses increased 3.3% to reach $102.5 million due to higher IT and infrastructure-related costs as well as greater sales and marketing investments. However, advertising and promotional costs declined year over year.
Adjusted EBITDA (including unconsolidated joint ventures) increased 6% to $215.4 million, driven by higher operating income and benefits from BSW acquisition.
Segment Analysis
Sales in the Global segment grew 13% to $526.5 million, courtesy of better price/mix and higher volumes. Volumes increased 10% on strong sales to strategic consumers in the United States and core international regions as well as gains from limited time product offerings (or LTOs). Price/mix increased 3%, courtesy of pricing adjustments in multi-year contracts. Product contribution margin in the segment increased 11% to $110.7 million, backed by higher volumes, supply chain efficiencies and price/mix gains. These were partially countered by high input, transportation and manufacturing costs.
Foodservice sales increased 7% to $313.1 million on the back of improved price/mix. The upside was driven by consistent favorable impact of strategic pricing actions undertaken in the last year and better mix. Moreover, volumes inched up 1% on the back of branded products growth. Product contribution margin rose 16% to $108.3 million, owing to improved price/mix and supply chain efficiencies that compensated for higher costs.
In the Retail segment, sales went up 3% to $129.2 million. The upside can be attributed to volume growth of 4%, stemming from increased branded and private label products sales. However, price/mix dropped 1% due to higher trade support. Product contribution margin inched down 1% to $21 million, thanks to lower price/mix.
Other Financial Details
Lamb Weston ended the quarter with cash and cash equivalents of $12.2 million, long-term debt (excluding current portion) of $2,280.2 million and total shareholders’ deficit of $4.6 million. The company generated $680.9 million as net cash from operating activities during fiscal 2019. Capital expenditures for the fiscal amounted to $334.2 million, majority of which were due to the construction of new production line in Oregon.
In fiscal 2019, the company returned almost $145.1 million through dividends and share repurchases. At the end of the quarter, the company had $218.2 million remaining under its $250-million share repurchase authorization.
Guidance
Management is pleased with its quarterly results, which reflects that its strategic endeavors are yielding well. Going ahead, management expects favorable market conditions to prevail and fuel performance. Moreover, it expects consistent gains from volumes and price/mix, which are likely to mitigate the adverse impacts of input cost inflation. Further, expenses are anticipated to rise considerably due to planned investments undertaken to support upgrade of information systems. Nevertheless, in the long run, such well-chalked investment plans are likely to boost the company’s operating efficiencies.
That said, management issued a favorable outlook for fiscal 2020, considering the gains from 53rd week. It expects net sales to increase mid-single digits, driven by higher volumes and price/mix. Adjusted EBITDA (including unconsolidated joint ventures) is expected in the range of $950-$970 million. Interest costs are projected to be roughly $110 million. Further, the company plans to use cash of $275 million for capital expenditures.
How Have Estimates Been Moving Since Then?
Fresh estimates followed a downward path over the past two months.
VGM Scores
At this time, Lamb Weston has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Lamb Weston has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.