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Lamb Weston (LW) Q2 Earnings & Sales Top Estimates, Up Y/Y
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Lamb Weston Holdings, Inc. (LW - Free Report) posted solid second-quarter fiscal 2024 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, favorable customer and product mix and gains from supply chain productivity cost savings.
Management reaffirmed its fiscal 2024 net sales guidance while raising its adjusted earnings per share (EPS) view.
Quarter in Detail
LW’s bottom line came in at $1.45 per share, surpassing the Zacks Consensus Estimate of $1.40. Adjusted earnings increased 15% year over year.
Net sales amounted to $1,732.1 million, up 36% year over year. The top line surpassed the Zacks Consensus Estimate of $1,695.5 million. Net sales (excluding the incremental sales attributable to buyouts) increased 6%.
Price/mix rose 12%, which reflects gains from inflation-induced pricing actions in business units and a positive mix. Reduced customer transportation charges somewhat offset these factors. We had expected price/mix to grow 10% during the reported quarter. Volume fell 6%, mainly reflecting LW’s efforts to exit some lower-priced and lower-margin businesses.
Gross profit came in at $475.6 million, up $94 million from the year-ago quarter’s levels. Gross profit, excluding unrealized mark-to-market gains and losses related to commodity derivatives and items impacting comparability, rose by $97.2 million. However, increased costs per pound put pressure on gross profits to some extent. Increased costs per pound reflect mid-single-digit cost inflation for key inputs like raw potatoes, grains, starches and labor. Supply chain productivity savings and reduced costs for edible oils offered respite.
Selling, general and administrative (SG&A) expenses escalated by $60.2 million to $170 million. We had expected the metric to come in at $ $185.3, reflecting a year-over-year increase of $75.7 million.
Adjusted EBITDA jumped 15% to $376.9 million, courtesy of increased income from operations. We had expected the metric to increase 18.9% to $384.1 million in the quarter.
Segment Analysis
Sales in the North America segment increased 10% to $1,167.1 million. Price/mix grew 14% on the carryover benefit of pricing actions undertaken during fiscal 2023 and positive mix. Reduced customer transportation charges somewhat offset these. Volume fell 4%, mainly due to management’s efforts to exit some businesses. Adjusted EBITDA in the segment came in at $321.3 million, which increased 7%.
In the International segment, sales increased 164% to $565 million. The price/mix advanced 10% and volumes jumped 154%. Volume (excluding gains from the LW EMEA acquisition) fell 22%, mainly due to management’s decision to exit some businesses and lapping of solid year-ago comparison. Adjusted EBITDA in the segment came in at $100.2 million, which jumped 66%.
Other Financial Details
The Zacks Rank #3 (Hold) company ended the quarter with cash and cash equivalents of $78.3 million, long-term debt and financing obligations (excluding the current portion) of $3,252.5 million and total shareholders’ equity of $1,667.7 million. The company generated $455.2 million as net cash from operating activities for the 26 weeks ended Nov 26, 2023.
Capital expenditures amounted to $566.5 million during this period. For fiscal 2024, the company expects cash to be used for capital expenditures in the band of $900-$950 million.
In the reported quarter, management paid out dividends worth $40.8 million. The company repurchased 571,986 shares for $50 million.
In December 2023, management hiked its quarterly dividend by 29% to 36 cents per share. The hiked dividend will be payable on Mar 1, 2024, to shareholders record as of Feb 2, 2024.
Guidance
For fiscal 2024, management still expects net sales in the range of $6.8-$7.0 billion. The guidance includes $1.1-$1.2 billion of sales attributed to the consolidation of LW EMEA.
Net sales, excluding buyouts, are still projected to grow 6.5-8.5%, on a low double-digit percentage points increase in price/mix. Sales volumes are likely to come under pressure due to the company’s efforts to exit some lower-priced and lower-margin businesses. Sales volumes are likely to decline mid-single-digits percentage points.
Lamb Weston expects SG&A expenses in the band of $745-$755 million. The company expects reported net income in the range of $830-$900 million compared with $800-$870 million expected earlier. Diluted earnings per share (EPS) are now envisioned in the range of $5.70-$6.15. Earlier, the metric was likely to come in the range of $5.47-$5.92.
Adjusted EBITDA is still anticipated to come in the $1,540-$1,620 million range. Management now expects adjusted net income between $830 and $900 million. Earlier, the metric was likely to be in the range of $805-$875 million. The company anticipated adjusted EPS of $5.70 to $6.15 compared with the $5.50 to $5.95 expected earlier.
Management expects an effective tax rate of 23-24%. Further, it anticipates depreciation and amortization expenses of nearly $305 million.
Shares of the company have gained 7.3% in the past three months compared with the industry’s 12.7% growth.
The Zacks Consensus Estimate for MGP Ingredients’ current financial year sales and earnings suggests growth of almost 6% and 14.2%, respectively, from the year-ago reported figures. MGPI has a trailing four-quarter earnings surprise of 16.2% on average.
Vital Farms Inc. (VITL - Free Report) offers a range of produced pasture-raised foods. It currently carries a Zacks Rank #2. VITL has a trailing four-quarter earnings surprise of 145% on average.
The Zacks Consensus Estimate for Vital Farms’ current financial year sales suggests growth of 29.4% from the year-ago reported figure.
Sysco Corporation (SYY - Free Report) , a food and related product company, currently has a Zacks Rank #2. SYY delivered a positive earnings surprise in the last two quarters.
The Zacks Consensus Estimate for Sysco’s current fiscal-year sales and earnings suggests growth of 4.1% and almost 8%, respectively, from the corresponding year-ago reported figure.
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Lamb Weston (LW) Q2 Earnings & Sales Top Estimates, Up Y/Y
Lamb Weston Holdings, Inc. (LW - Free Report) posted solid second-quarter fiscal 2024 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, favorable customer and product mix and gains from supply chain productivity cost savings.
Management reaffirmed its fiscal 2024 net sales guidance while raising its adjusted earnings per share (EPS) view.
Quarter in Detail
LW’s bottom line came in at $1.45 per share, surpassing the Zacks Consensus Estimate of $1.40. Adjusted earnings increased 15% year over year.
Net sales amounted to $1,732.1 million, up 36% year over year. The top line surpassed the Zacks Consensus Estimate of $1,695.5 million. Net sales (excluding the incremental sales attributable to buyouts) increased 6%.
Price/mix rose 12%, which reflects gains from inflation-induced pricing actions in business units and a positive mix. Reduced customer transportation charges somewhat offset these factors. We had expected price/mix to grow 10% during the reported quarter. Volume fell 6%, mainly reflecting LW’s efforts to exit some lower-priced and lower-margin businesses.
Gross profit came in at $475.6 million, up $94 million from the year-ago quarter’s levels. Gross profit, excluding unrealized mark-to-market gains and losses related to commodity derivatives and items impacting comparability, rose by $97.2 million. However, increased costs per pound put pressure on gross profits to some extent. Increased costs per pound reflect mid-single-digit cost inflation for key inputs like raw potatoes, grains, starches and labor. Supply chain productivity savings and reduced costs for edible oils offered respite.
Selling, general and administrative (SG&A) expenses escalated by $60.2 million to $170 million. We had expected the metric to come in at $ $185.3, reflecting a year-over-year increase of $75.7 million.
Adjusted EBITDA jumped 15% to $376.9 million, courtesy of increased income from operations. We had expected the metric to increase 18.9% to $384.1 million in the quarter.
Segment Analysis
Sales in the North America segment increased 10% to $1,167.1 million. Price/mix grew 14% on the carryover benefit of pricing actions undertaken during fiscal 2023 and positive mix. Reduced customer transportation charges somewhat offset these. Volume fell 4%, mainly due to management’s efforts to exit some businesses. Adjusted EBITDA in the segment came in at $321.3 million, which increased 7%.
In the International segment, sales increased 164% to $565 million. The price/mix advanced 10% and volumes jumped 154%. Volume (excluding gains from the LW EMEA acquisition) fell 22%, mainly due to management’s decision to exit some businesses and lapping of solid year-ago comparison. Adjusted EBITDA in the segment came in at $100.2 million, which jumped 66%.
Other Financial Details
The Zacks Rank #3 (Hold) company ended the quarter with cash and cash equivalents of $78.3 million, long-term debt and financing obligations (excluding the current portion) of $3,252.5 million and total shareholders’ equity of $1,667.7 million. The company generated $455.2 million as net cash from operating activities for the 26 weeks ended Nov 26, 2023.
Capital expenditures amounted to $566.5 million during this period. For fiscal 2024, the company expects cash to be used for capital expenditures in the band of $900-$950 million.
In the reported quarter, management paid out dividends worth $40.8 million. The company repurchased 571,986 shares for $50 million.
In December 2023, management hiked its quarterly dividend by 29% to 36 cents per share. The hiked dividend will be payable on Mar 1, 2024, to shareholders record as of Feb 2, 2024.
Guidance
For fiscal 2024, management still expects net sales in the range of $6.8-$7.0 billion. The guidance includes $1.1-$1.2 billion of sales attributed to the consolidation of LW EMEA.
Net sales, excluding buyouts, are still projected to grow 6.5-8.5%, on a low double-digit percentage points increase in price/mix. Sales volumes are likely to come under pressure due to the company’s efforts to exit some lower-priced and lower-margin businesses. Sales volumes are likely to decline mid-single-digits percentage points.
Lamb Weston expects SG&A expenses in the band of $745-$755 million. The company expects reported net income in the range of $830-$900 million compared with $800-$870 million expected earlier. Diluted earnings per share (EPS) are now envisioned in the range of $5.70-$6.15. Earlier, the metric was likely to come in the range of $5.47-$5.92.
Adjusted EBITDA is still anticipated to come in the $1,540-$1,620 million range. Management now expects adjusted net income between $830 and $900 million. Earlier, the metric was likely to be in the range of $805-$875 million. The company anticipated adjusted EPS of $5.70 to $6.15 compared with the $5.50 to $5.95 expected earlier.
Management expects an effective tax rate of 23-24%. Further, it anticipates depreciation and amortization expenses of nearly $305 million.
Shares of the company have gained 7.3% in the past three months compared with the industry’s 12.7% growth.
Top 3 Staple Bets
MGP Ingredients, Inc. (MGPI - Free Report) produces and markets ingredients and distillery products to the packaged goods industry. The company currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for MGP Ingredients’ current financial year sales and earnings suggests growth of almost 6% and 14.2%, respectively, from the year-ago reported figures. MGPI has a trailing four-quarter earnings surprise of 16.2% on average.
Vital Farms Inc. (VITL - Free Report) offers a range of produced pasture-raised foods. It currently carries a Zacks Rank #2. VITL has a trailing four-quarter earnings surprise of 145% on average.
The Zacks Consensus Estimate for Vital Farms’ current financial year sales suggests growth of 29.4% from the year-ago reported figure.
Sysco Corporation (SYY - Free Report) , a food and related product company, currently has a Zacks Rank #2. SYY delivered a positive earnings surprise in the last two quarters.
The Zacks Consensus Estimate for Sysco’s current fiscal-year sales and earnings suggests growth of 4.1% and almost 8%, respectively, from the corresponding year-ago reported figure.