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Lamb Weston (LW) Q2 Earnings Top Estimates, Sales Rise Y/Y
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Lamb Weston Holdings, Inc. (LW - Free Report) posted solid second-quarter fiscal 2023 results, with the top and the bottom line beating the Zacks Consensus Estimate. Net sales and earnings increased year over year. Management also raised its net sales and earnings guidance range for fiscal 2023.
Quarter in Detail
LW’s bottom line came in at $1.28 per share, which surpassed the Zacks Consensus Estimate of 74 cents. Earnings increased 172% from the year-ago quarter’s reported figure.
Net sales amounted to $1,276.5 million, up 27% year over year. The top line surpassed the Zacks Consensus Estimate of $1,159.1 million. The price/mix increased 30%, reflecting gains from product and freight pricing actions in all core business units undertaken to counter input, manufacturing and transportation cost inflation. Volume fell 3% due to the inability to completely serve customer demand across foodservice and retail channels.
The adverse impact of supply chain-related issues, including the impact of commodities shortages as well as onboarding new production workers, continued to hamper production run rates and throughput in the manufacturing units and customer order fulfillment rates. Lower casual dining and full-service restaurant traffic across the United States also pressured volumes to some extent amid a tough macroeconomic environment.
Gross profit came in at $381.6 million, up $176.1 million, as gains from pricing actions more than countered the adverse impact of increased manufacturing and distribution expenses on a per-pound basis along with reduced sales volumes. Increased costs per pound mainly reflect double-digit cost inflation for key inputs like edible oils, ingredients -- namely grains and starches, labor, transportation and warehousing. In addition, higher costs from the impact of major summer heat also caused a rise in costs per pound. The impact of supply chain disruptions was a headwind.
SG&A expenses escalated by $18.7 million to $109.8 million. Adjusted EBITDA (including unconsolidated joint ventures) jumped 92% to $334.6 million, courtesy of increased income from operations.
Segment Analysis
Sales in the Global segment increased 34% to $692.8 million. Volumes grew 3% while price/mix increased 31%. The price/mix benefited from domestic and international product and freight pricing actions, along with a positive mix. Increased international shipments and strength in domestic QSR limited-time product offerings, among others, drove volumes in the segment. The product contribution margin in the segment jumped 111% to $171 million.
Foodservice sales increased 14% to $357.9 million. Volumes decreased 11% and the price/mix increased 25%. Favorable price/mix reflects carryover gains of product and freight pricing actions to mitigate inflation along with pricing efforts undertaken during fiscal 2023. Volumes were hurt by supply chain disruptions on run rates and throughput as well as some softness in restaurant traffic and consumer demand for casual dining and other full-service restaurants, among other reasons. The product contribution margin increased 25% to reach $130.8 million.
In the Retail segment, sales went up 34% to $191.5 million. The price/mix advanced 43%, but volumes declined 9%. The price/mix benefited from the carryover impact of pricing actions in the branded and private label portfolios as well as pricing actions carried over in fiscal 2023. Supply chain-related issues, among other reasons, hurt sales volume. The product contribution margin surged 207% to $65.7 million.
Other Financial Details
Lamb Weston ended the quarter with cash and cash equivalents of $419.4 million, long-term debt and financing obligations (excluding the current portion) of $2,701.1 million and total shareholders’ equity of $573 million. The company generated $288 million as net cash from operating activities for the 26 weeks ended Nov 27, 2022.
Capital expenditures amounted to $270.3 million during the reported quarter. For fiscal 2023, the company expects cash used for capital expenditures in the band of $475-$525 million.
During the reported quarter, management paid out dividends worth $35.3 million.
Image Source: Zacks Investment Research
Guidance
For fiscal 2023, management now expects net sales growth in the range of $4.8-$4.9 billion. Earlier, the company had anticipated delivering net sales at the higher end of a $4.7-$4.8 billion range.
Net sales growth is likely to be driven by gains from pricing actions. Management anticipates sales volumes to be under pressure in the back half of fiscal 2023 due to the adverse impact of ongoing supply chain disruptions on run rates and throughput across its manufacturing units. A potential slowdown in restaurant traffic amid a tough macroeconomic environment is likely to hurt volumes.
Lamb Weston now expects SG&A expenses in the band of $525-$550 million compared with the earlier range of $475-$500 million. Adjusted EBITDA (including unconsolidated joint ventures) is likely to come in the range of $1,050-$1,100 million compared with $840-$910 million forecast earlier.
Adjusted net income is now anticipated in the range of $540-$580 million. Adjusted diluted earnings per share (EPS) are now envisioned in the range of $3.75-$4.00, up from the previously provided guidance range of $2.45-$2.85.
Management expects interest expenses of approximately $115 million for fiscal 2023 and an effective tax rate of nearly 24%. Further, it anticipates depreciation and amortization expenses of roughly $210 million.
Shares of this Zacks Rank #3 (Hold) company have gained 18.9% in the past three months compared with the industry’s growth of 4.9%.
e.l.f. Beauty, operating as a cosmetic and skin care products provider, currently sports a Zacks Rank of 1. ELF has a trailing four-quarter earnings surprise of 92.8%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for e.l.f. Beauty’s current financial year’s sales and earnings suggests growth of 24.6% and 33.3%, respectively, from the prior-year reported numbers.
Conagra Brands, operating as a consumer-packaged goods food company, currently carries a Zacks Rank of 2 (Buy). CAG has a trailing four-quarter earnings surprise of 1.8%, on average.
The Zacks Consensus Estimate for Conagra Brands’ current financial year sales and earnings suggests growth of 5.8% and 4.2%, respectively, from the corresponding year-ago reported figures.
Campbell Soup, which manufactures and markets food and beverage products, currently carries a Zacks Rank of 2. CPB has a trailing four-quarter earnings surprise of 8.7%, on average.
The Zacks Consensus Estimate for Campbell Soup’s current financial-year sales and earnings suggests growth of 8.2% and 4.9%, respectively, from the corresponding year-ago reported figures.
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Lamb Weston (LW) Q2 Earnings Top Estimates, Sales Rise Y/Y
Lamb Weston Holdings, Inc. (LW - Free Report) posted solid second-quarter fiscal 2023 results, with the top and the bottom line beating the Zacks Consensus Estimate. Net sales and earnings increased year over year. Management also raised its net sales and earnings guidance range for fiscal 2023.
Quarter in Detail
LW’s bottom line came in at $1.28 per share, which surpassed the Zacks Consensus Estimate of 74 cents. Earnings increased 172% from the year-ago quarter’s reported figure.
Net sales amounted to $1,276.5 million, up 27% year over year. The top line surpassed the Zacks Consensus Estimate of $1,159.1 million. The price/mix increased 30%, reflecting gains from product and freight pricing actions in all core business units undertaken to counter input, manufacturing and transportation cost inflation. Volume fell 3% due to the inability to completely serve customer demand across foodservice and retail channels.
The adverse impact of supply chain-related issues, including the impact of commodities shortages as well as onboarding new production workers, continued to hamper production run rates and throughput in the manufacturing units and customer order fulfillment rates. Lower casual dining and full-service restaurant traffic across the United States also pressured volumes to some extent amid a tough macroeconomic environment.
Lamb Weston Price, Consensus and EPS Surprise
Lamb Weston price-consensus-eps-surprise-chart | Lamb Weston Quote
Gross profit came in at $381.6 million, up $176.1 million, as gains from pricing actions more than countered the adverse impact of increased manufacturing and distribution expenses on a per-pound basis along with reduced sales volumes. Increased costs per pound mainly reflect double-digit cost inflation for key inputs like edible oils, ingredients -- namely grains and starches, labor, transportation and warehousing. In addition, higher costs from the impact of major summer heat also caused a rise in costs per pound. The impact of supply chain disruptions was a headwind.
SG&A expenses escalated by $18.7 million to $109.8 million. Adjusted EBITDA (including unconsolidated joint ventures) jumped 92% to $334.6 million, courtesy of increased income from operations.
Segment Analysis
Sales in the Global segment increased 34% to $692.8 million. Volumes grew 3% while price/mix increased 31%. The price/mix benefited from domestic and international product and freight pricing actions, along with a positive mix. Increased international shipments and strength in domestic QSR limited-time product offerings, among others, drove volumes in the segment. The product contribution margin in the segment jumped 111% to $171 million.
Foodservice sales increased 14% to $357.9 million. Volumes decreased 11% and the price/mix increased 25%. Favorable price/mix reflects carryover gains of product and freight pricing actions to mitigate inflation along with pricing efforts undertaken during fiscal 2023. Volumes were hurt by supply chain disruptions on run rates and throughput as well as some softness in restaurant traffic and consumer demand for casual dining and other full-service restaurants, among other reasons. The product contribution margin increased 25% to reach $130.8 million.
In the Retail segment, sales went up 34% to $191.5 million. The price/mix advanced 43%, but volumes declined 9%. The price/mix benefited from the carryover impact of pricing actions in the branded and private label portfolios as well as pricing actions carried over in fiscal 2023. Supply chain-related issues, among other reasons, hurt sales volume. The product contribution margin surged 207% to $65.7 million.
Other Financial Details
Lamb Weston ended the quarter with cash and cash equivalents of $419.4 million, long-term debt and financing obligations (excluding the current portion) of $2,701.1 million and total shareholders’ equity of $573 million. The company generated $288 million as net cash from operating activities for the 26 weeks ended Nov 27, 2022.
Capital expenditures amounted to $270.3 million during the reported quarter. For fiscal 2023, the company expects cash used for capital expenditures in the band of $475-$525 million.
During the reported quarter, management paid out dividends worth $35.3 million.
Image Source: Zacks Investment Research
Guidance
For fiscal 2023, management now expects net sales growth in the range of $4.8-$4.9 billion. Earlier, the company had anticipated delivering net sales at the higher end of a $4.7-$4.8 billion range.
Net sales growth is likely to be driven by gains from pricing actions. Management anticipates sales volumes to be under pressure in the back half of fiscal 2023 due to the adverse impact of ongoing supply chain disruptions on run rates and throughput across its manufacturing units. A potential slowdown in restaurant traffic amid a tough macroeconomic environment is likely to hurt volumes.
Lamb Weston now expects SG&A expenses in the band of $525-$550 million compared with the earlier range of $475-$500 million. Adjusted EBITDA (including unconsolidated joint ventures) is likely to come in the range of $1,050-$1,100 million compared with $840-$910 million forecast earlier.
Adjusted net income is now anticipated in the range of $540-$580 million. Adjusted diluted earnings per share (EPS) are now envisioned in the range of $3.75-$4.00, up from the previously provided guidance range of $2.45-$2.85.
Management expects interest expenses of approximately $115 million for fiscal 2023 and an effective tax rate of nearly 24%. Further, it anticipates depreciation and amortization expenses of roughly $210 million.
Shares of this Zacks Rank #3 (Hold) company have gained 18.9% in the past three months compared with the industry’s growth of 4.9%.
3 Solid Staple Picks
Some other top-ranked stocks are e.l.f. Beauty (ELF - Free Report) , Conagra Brands (CAG - Free Report) and Campbell Soup (CPB - Free Report) .
e.l.f. Beauty, operating as a cosmetic and skin care products provider, currently sports a Zacks Rank of 1. ELF has a trailing four-quarter earnings surprise of 92.8%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for e.l.f. Beauty’s current financial year’s sales and earnings suggests growth of 24.6% and 33.3%, respectively, from the prior-year reported numbers.
Conagra Brands, operating as a consumer-packaged goods food company, currently carries a Zacks Rank of 2 (Buy). CAG has a trailing four-quarter earnings surprise of 1.8%, on average.
The Zacks Consensus Estimate for Conagra Brands’ current financial year sales and earnings suggests growth of 5.8% and 4.2%, respectively, from the corresponding year-ago reported figures.
Campbell Soup, which manufactures and markets food and beverage products, currently carries a Zacks Rank of 2. CPB has a trailing four-quarter earnings surprise of 8.7%, on average.
The Zacks Consensus Estimate for Campbell Soup’s current financial-year sales and earnings suggests growth of 8.2% and 4.9%, respectively, from the corresponding year-ago reported figures.