What Happened?
Shares of potato products company Lamb Weston (NYSE: LW) jumped 3.2% in the afternoon session after the release of a favorable Consumer Price Index (CPI) report showed inflation cooling more than anticipated. The July report from the Bureau of Labor Statistics indicated a year-over-year inflation rate of 2.7%, just below the 2.8% economists had forecast. This suggests that price pressures on consumers may be easing. Particularly beneficial for the sector was the news that the food index remained flat, with grocery prices even declining by 0.1% month-over-month. This development is seen as a positive for the profitability of food, beverage, and personal care companies, as lower input costs and increased consumer purchasing power could boost sales. A Federal Reserve official's comments on the same day, noting that consumer spending fundamentals remain solid, further bolstered investor confidence in the sector's resilience.
After the initial pop the shares cooled down to $53.17, up 3% from previous close.
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What Is The Market Telling Us
Lamb Weston’s shares are somewhat volatile and have had 12 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 20 days ago when the stock gained 17% on the news that the company reported fiscal fourth-quarter results that significantly beat Wall Street expectations and announced a new strategic cost-saving program. The company posted adjusted earnings of 87 cents per share on revenue of $1.68 billion. These results comfortably surpassed analysts' average estimates, which called for earnings of 63 cents per share on revenue of $1.59 billion. The strong performance was driven by an 8% increase in overall sales volume, which included a notable 16% jump in international volume. This growth was attributed to new customer contracts and recovering demand. Adding to the positive sentiment, Lamb Weston unveiled a new cost-cutting plan, "Focus to Win," aimed at delivering at least $250 million in annualized savings by the end of fiscal 2028. The initiative included a global workforce reduction of approximately 4%. While the company's fiscal 2026 guidance was mixed, the strong quarterly beat and the aggressive new efficiency program appeared to give investors confidence in the company's direction.
Lamb Weston is down 19.5% since the beginning of the year, and at $53.17 per share, it is trading 35.4% below its 52-week high of $82.32 from December 2024. Investors who bought $1,000 worth of Lamb Weston’s shares 5 years ago would now be looking at an investment worth $825.88.
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