Lamb Weston’s fourth quarter drew a significant negative market reaction amid concerns about softer profitability and a cautious forward outlook, despite the company beating Wall Street’s revenue and non-GAAP profit expectations. Management attributed the quarter’s results to strong volume growth, particularly in North America and Asia, and improved cost discipline through ongoing savings initiatives. However, CEO Mike Smith acknowledged that price mix headwinds, driven by increased trade support and a shift toward lower-margin sales, weighed on margins. Smith described the turnaround as “not linear,” emphasizing persistent macroeconomic and industry pressures.
Is now the time to buy LW? Find out in our full research report (it’s free for active Edge members).
Lamb Weston (LW) Q4 CY2025 Highlights:
- Revenue: $1.62 billion vs analyst estimates of $1.59 billion (1.1% year-on-year growth, 1.8% beat)
- Adjusted EPS: $0.69 vs analyst estimates of $0.65 (6.4% beat)
- Adjusted EBITDA: $285.7 million vs analyst estimates of $273.4 million (17.7% margin, 4.5% beat)
- The company reconfirmed its revenue guidance for the full year of $6.45 billion at the midpoint
- EBITDA guidance for the full year is $1.1 billion at the midpoint, below analyst estimates of $1.19 billion
- Operating Margin: 8.6%, up from 1.2% in the same quarter last year
- Organic Revenue rose 1% year on year vs analyst estimates of 1.5% declines (254 basis point beat)
- Sales Volumes rose 8% year on year (-6% in the same quarter last year)
- Market Capitalization: $5.9 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Lamb Weston’s Q4 Earnings Call
- Tom Palmer (JPMorgan): Asked about supply-demand rebalancing and the likelihood of more substantial production curtailments in Europe. CEO Mike Smith confirmed a single line curtailment in Europe and emphasized ongoing global supply chain adjustments.
- Peter Galbo (Bank of America): Inquired about intensified competition in Asia and potential margin impacts. Smith explained that added capacity in developing markets is creating export price pressure but expects long-term growth, especially in Latin America.
- Robert Moskow (TD Cowen): Questioned the decision to reopen North American capacity and its effect on profitability. Smith clarified that reopening was needed to maintain fill rates, with no expected cost drag, and will be sustained as long as volume remains high.
- Max Gumport (BNP): Pressed management on what could lead to the lower end of EBITDA guidance and the implications for margin trends into next year. Smith and CFO Bernadette Madarieta cited mix headwinds and international ramp-up costs as key risks but maintained confidence in North America.
- William Reuter (Bank of America): Asked if customer pricing support reflected past operational missteps. Smith denied this, attributing current pricing to competitive market conditions and highlighting improved customer partnerships and service levels.
Catalysts in Upcoming Quarters
In the upcoming quarters, the StockStory team will watch (1) whether Lamb Weston’s volume momentum in North America can offset ongoing mix and pricing headwinds, (2) the pace of margin recovery as cost savings initiatives and supply chain optimization take hold, and (3) progress in ramping up production and achieving profitability improvements at the new Argentina facility. Execution on innovation and the ability to adapt to competitive international dynamics will also be important markers to monitor.
Lamb Weston currently trades at $42.48, down from $59.33 just before the earnings. Is the company at an inflection point that warrants a buy or sell? Find out in our full research report (it’s free for active Edge members).
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