Lamb Weston Stock Gains After Earnings Beat, Layoff News

closeup of cardboard Lamb Weston french fry box — (Image credit: Smith Collection/Gado/Getty Images)

Lamb Weston (LW) stock had a slow start Wednesday but was last seen higher after the french fry maker beat top- and bottom-line expectations for its fiscal first quarter.

LW also announced a restructuring plan and updated its full-year profit outlook.

In the 13 weeks ended August 25, Lamb Weston's revenue slipped 0.7% year over year to $1.65 billion. Its earnings per share (EPS) decreased 55.2% from the year-ago period to 73 cents.

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"We delivered first quarter financial results that were generally in line with our expectations, driven by sequentially improved volume performance, solid price/mix, and strict management of operating costs," said Lamb Weston CEO Tom Werner in a statement.

But the executive added that "restaurant traffic and frozen potato demand, relative to supply, continue to be soft, and we believe it will remain soft through the remainder of fiscal 2025."

The results topped analysts' expectations. Wall Street was anticipating revenue of $1.56 billion and earnings of 72 cents per share, according to TipRanks.

Lamb Weston also announced a restructuring plan to reduce operating expenses and "better manage" its factory utilization rates, which includes closing its plant in Connell, Washington, reducing its global workforce by approximately 4% and eliminating certain unfilled job positions. The initiatives are expected to generate $55 million in pre-tax cost savings and reduce capital expenditures by $100 million in fiscal 2025.

As a result of the restructuring plan, Lamb Weston updated its full-year profit outlook. The company now anticipates EPS in the range of $4.15 to $4.35, which is down from its previous forecast of $4.35 to $4.85. However, it continues to expect that revenue will range between $6.6 billion to $6.8 billion.

"These actions are proactive steps designed to improve our operating efficiency, profitability and cash flows, while also positioning us to continue to make strategic investments to support our customers and create value for our stakeholders over the long-term," Werner said.

Is Lamb Weston stock a buy, sell or hold?

Lamb Weston has struggled on the price charts so far in 2024, down 29% on a total return basis (price change plus dividends). Most of Wall Street remains bullish on the consumer staples stock.

According to S&P Global Market Intelligence, the average analyst target price for LW stock is $71.69, representing implied upside of roughly 8% to current levels. Additionally, the consensus recommendation is Buy.

However, not everyone is as upbeat. Financial services firm Stifel, for instance, has a Hold rating and $60 price target on the mid-cap stock.

"Our Hold rating reflects the slower growth environment for Lamb Weston as the company contends with weaker demand and lower processing capacity utilization across the industry," says Stifel analyst Matthew Smith. "We believe pricing power will continue to be limited as the company invests to improve recover and improve its market share."

Joey Solitro is a freelance financial journalist at Kiplinger with more than a decade of experience. A longtime equity analyst, Joey has covered a range of industries for media outlets including The Motley Fool, Seeking Alpha, Market Realist, and TipRanks. Joey holds a bachelor's degree in business administration.