It has been about a month since the last earnings report for Lamb Weston (LW Quick QuoteLW - Free Report) . Shares have lost about 5% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Lamb Weston due for a breakout? 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 catalysts.

Lamb Weston Q4 Earnings & Sales Top Estimates, Rise Y/Y

Lamb Weston posted solid fourth-quarter fiscal 2023 results, with the top and the bottom line beating the Zacks Consensus Estimate. Net sales and earnings increased year over year. Results gained from improved pricing in every key segment and supply chain productivity savings.

Quarter in Detail

LW’s bottom line came in at $1.22 per share, surpassing the Zacks Consensus Estimate of $1.05. Earnings increased 91% from the year-ago quarter’s reported figure.

Net sales amounted to $1,694.9 million, up 47% year over year. The top line surpassed the Zacks Consensus Estimate of $1,653.8 million. Net sales (excluding the incremental sales attributable to buyouts) increased 14%. Price/mix rose 24%, which reflects gains from pricing actions in every core business unit, undertaken to counter input and manufacturing cost inflation. Also, a favorable mix was an upside. Volume fell 10%, which reflects on the company’s efforts to exit some lower-priced and lower-margin businesses. Soft demand owing to slowdown in casual and full-service restaurant traffic, inventory destocking by some customers across international markets and certain U.S. retail channels also led to the downside.

Gross profit came in at $379.4 million, up $125.2 million from the year-ago quarter’s levels. Effective pricing actions aided the company’s gross profits. However, increased costs per pound and reduced sales volumes were hurdles. Increased costs per pound reflects high-single-digit cost inflation for key inputs like raw potatoes, energy, labor, edible oils, and ingredients including grains as well as starches. Further, reduced throughput at LW’s production facilities also increased costs.

SG&A expenses escalated by $74.2 million to $192.4 million. Adjusted EBITDA (including unconsolidated joint ventures) jumped 59% to $318.1 million, courtesy of increased income from operations.

Segment Analysis

Sales in the Global segment increased 85% to $1,033.4 million. Price/mix grew 28% on gains from domestic and international pricing actions to counter inflationary pressures. Volume in the segment was hurt by the company’s efforts to exit some lower-priced and lower-margin business across international and domestic markets. Reduced shipments owing to inventory destocking was also a downside. The product contribution margin in the segment jumped 211% to $173.3 million.

Foodservice sales increased 4% to $404.9 million. Volumes declined 9% and the price/mix increased 13%. The price/mix benefited from pricing actions undertaken during fiscal 2023 to mitigate inflationary pressures. Volumes were hurt by incremental losses of certain lower-priced and lower-margin business and the slowdown in casual dining and other full-service restaurant traffic to some extent. The product contribution margin in the unit fell 2% to $139.1 million.

In the Retail segment, sales went up 25% to $220.6 million. The price/mix advanced 35% and volumes fell 10%. The price/mix benefited from pricing actions undertaken during fiscal 2023 in branded and private label portfolios to mitigate inflationary pressures. The product contribution margin surged 100% to $83.1 million.

Other Financial Details

Lamb Weston ended the quarter with cash and cash equivalents of $304.8 million, long-term debt and financing obligations (excluding the current portion) of $3,248.4 million and total shareholders’ equity of $1,411.3 million. The company generated $761.7 million as net cash from operating activities for the 52 weeks ended May 28, 2023.

Capital expenditures amounted to $736 million during fiscal 2023. For fiscal 2024, the company expects cash used for capital expenditures in the band of $800-$900 million. During fiscal 2023, management paid out dividends worth $146.1 million. The company repurchased 569,698 shares for $45 million.

Guidance

For fiscal 2024, management expects net sales in the range of $6.7-$6.9 billion. The guidance includes $1-$1.1 billion of sales attributed to the consolidation of LW EMEA. Lamb Weston expects SG&A expenses in the band of $765-$775 million. Adjusted EBITDA (including unconsolidated joint ventures) is likely to come in the range of $1,450-$1,525 million. The company expects net income in the range of $725-$790 million. Diluted earnings per share (EPS) are envisioned in the range of $4.95-$5.40. Management expects interest expenses of approximately $165 million for fiscal 2024 and an effective tax rate of 23-24%. Further, it anticipates depreciation and amortization expenses of nearly $325 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

Currently, Lamb Weston has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% 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

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Lamb Weston has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.