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Lamb Weston is a global producer, marketer, and distributor of frozen potato products. The company offers frozen potatoes, commercial ingredients, and appetizers under the Lamb Weston brand, in addition to other licensed brands and various customer labels.
Lamb Weston is also engaged in the vegetable and dairy business. It serves retail and foodservice customers, specialty retailers, convenience stores, and both independent and chain restaurants. Lamb Weston was founded in 1950 and is headquartered in Eagle, Idaho.
The stock was recently downgraded by analysts at Bank of America, who cited intensifying global competition and disappointing quarterly results. As we’ll see, the consensus trend for earnings estimates shows a clear negative tilt.
The Zacks Rundown
Lamb Weston (LW - Free Report) , a Zacks Rank #5 (Strong Sell) stock, is a component of the Zacks Food – Miscellaneous industry group, which currently ranks in the bottom 37% out of approximately 250 Zacks Ranked Industries. As such, we expect this industry group as a whole to underperform the market over the next 3 to 6 months, just as it has throughout 2024:
Image Source: Zacks Investment Research
Stocks in the bottom tiers of industries can often be intriguing short candidates. While individual stocks have the ability to outperform even when they’re part of a lagging industry, the inclusion in a weaker group serves as a headwind for any potential rallies and the journey forward is that much more difficult.
Lamb Weston shares have been underperforming this year while the general market returned to new heights. The stock has experienced considerable volatility and represents a compelling short opportunity as we approach the New Year.
Undoubtedly a key player in the frozen potato market, the company has been grappling with several challenges in recent months. Critical factors include a decline in global restaurant traffic, rising competition, and a tough manufacturing environment.
Recent Earnings Misses & Deteriorating Outlook
Lamb Weston has fallen short of earnings estimates in three of the past four quarters. Earlier in December, the french-fry producer posted dismal results for its fiscal second quarter. Adjusted earnings came in at 66 cents per share, reflecting a -35% miss versus the consensus estimate. The metric also plunged -54% versus the year-ago period.
Net sales of $1.6 billion fell -8% year-over-year and also missed the Zacks Consensus Estimate. Lamb Weston continues to witness lower volumes and expects difficulties to linger throughout this year as well as fiscal 2026. Higher raw potato prices, inefficiencies, and increased transportation and warehousing costs are adding to company pressures.
The company has delivered a trailing four-quarter average earnings miss of -21.7%. Consistently falling short of earnings estimates is a recipe for underperformance, and LW is no exception.
Lamb Weston has been on the receiving end of negative earnings estimate revisions as of late. Looking at fiscal 2025, analysts have slashed estimates by a whopping -18.31% in the past 60 days. The Zacks Consensus EPS Estimate is now $3.48 per share, reflecting negative growth of -31.5% relative to the prior year.
Image Source: Zacks Investment Research
Falling earnings estimates are a huge red flag and need to be respected. Negative growth year-over-year is the type of trend that bears like to see.
Technical Outlook
As illustrated below, LW stock is in a sustained downtrend. Notice how the stock has shown very little in the way of a trend, widely underperforming the major indices. Also note that shares are trading below a downward-sloping 200-day (blue line) moving average – another good sign for the bears.
Image Source: StockCharts
The stock has had trouble putting together any sort of sustainable stretch above the 200-day average, frustrating investors. Shares would have to make an outsized move to the upside and show increasing earnings estimate revisions to warrant taking any long positions. LW stock has fallen more than 35% this year alone.
Final Thoughts
A deteriorating fundamental and technical backdrop show that this stock will likely stay frozen for the foreseeable future. The fact that LW is included in one of the worst-performing industry groups adds yet another headwind to a long list of concerns. A history of earnings misses and falling future earnings estimates will likely serve as a ceiling to any potential rallies, nurturing the stock’s downtrend.
Potential investors may want to give this stock the cold shoulder, or perhaps include it as part of a short or hedge strategy. Bulls will want to steer clear of LW until the situation shows major signs of improvement.
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Bear of the Day: Lamb Weston (LW)
Lamb Weston is a global producer, marketer, and distributor of frozen potato products. The company offers frozen potatoes, commercial ingredients, and appetizers under the Lamb Weston brand, in addition to other licensed brands and various customer labels.
Lamb Weston is also engaged in the vegetable and dairy business. It serves retail and foodservice customers, specialty retailers, convenience stores, and both independent and chain restaurants. Lamb Weston was founded in 1950 and is headquartered in Eagle, Idaho.
The stock was recently downgraded by analysts at Bank of America, who cited intensifying global competition and disappointing quarterly results. As we’ll see, the consensus trend for earnings estimates shows a clear negative tilt.
The Zacks Rundown
Lamb Weston (LW - Free Report) , a Zacks Rank #5 (Strong Sell) stock, is a component of the Zacks Food – Miscellaneous industry group, which currently ranks in the bottom 37% out of approximately 250 Zacks Ranked Industries. As such, we expect this industry group as a whole to underperform the market over the next 3 to 6 months, just as it has throughout 2024:
Image Source: Zacks Investment Research
Stocks in the bottom tiers of industries can often be intriguing short candidates. While individual stocks have the ability to outperform even when they’re part of a lagging industry, the inclusion in a weaker group serves as a headwind for any potential rallies and the journey forward is that much more difficult.
Lamb Weston shares have been underperforming this year while the general market returned to new heights. The stock has experienced considerable volatility and represents a compelling short opportunity as we approach the New Year.
Undoubtedly a key player in the frozen potato market, the company has been grappling with several challenges in recent months. Critical factors include a decline in global restaurant traffic, rising competition, and a tough manufacturing environment.
Recent Earnings Misses & Deteriorating Outlook
Lamb Weston has fallen short of earnings estimates in three of the past four quarters. Earlier in December, the french-fry producer posted dismal results for its fiscal second quarter. Adjusted earnings came in at 66 cents per share, reflecting a -35% miss versus the consensus estimate. The metric also plunged -54% versus the year-ago period.
Net sales of $1.6 billion fell -8% year-over-year and also missed the Zacks Consensus Estimate. Lamb Weston continues to witness lower volumes and expects difficulties to linger throughout this year as well as fiscal 2026. Higher raw potato prices, inefficiencies, and increased transportation and warehousing costs are adding to company pressures.
The company has delivered a trailing four-quarter average earnings miss of -21.7%. Consistently falling short of earnings estimates is a recipe for underperformance, and LW is no exception.
Lamb Weston has been on the receiving end of negative earnings estimate revisions as of late. Looking at fiscal 2025, analysts have slashed estimates by a whopping -18.31% in the past 60 days. The Zacks Consensus EPS Estimate is now $3.48 per share, reflecting negative growth of -31.5% relative to the prior year.
Image Source: Zacks Investment Research
Falling earnings estimates are a huge red flag and need to be respected. Negative growth year-over-year is the type of trend that bears like to see.
Technical Outlook
As illustrated below, LW stock is in a sustained downtrend. Notice how the stock has shown very little in the way of a trend, widely underperforming the major indices. Also note that shares are trading below a downward-sloping 200-day (blue line) moving average – another good sign for the bears.
Image Source: StockCharts
The stock has had trouble putting together any sort of sustainable stretch above the 200-day average, frustrating investors. Shares would have to make an outsized move to the upside and show increasing earnings estimate revisions to warrant taking any long positions. LW stock has fallen more than 35% this year alone.
Final Thoughts
A deteriorating fundamental and technical backdrop show that this stock will likely stay frozen for the foreseeable future. The fact that LW is included in one of the worst-performing industry groups adds yet another headwind to a long list of concerns. A history of earnings misses and falling future earnings estimates will likely serve as a ceiling to any potential rallies, nurturing the stock’s downtrend.
Potential investors may want to give this stock the cold shoulder, or perhaps include it as part of a short or hedge strategy. Bulls will want to steer clear of LW until the situation shows major signs of improvement.