What Happened?
Shares of potato products company Lamb Weston (NYSE: LW) fell 24.1% in the afternoon session after its fourth-quarter (fiscal Q2) results beat expectations but its full-year outlook fell short of analyst forecasts, raising concerns about future profitability.
For the quarter, revenue grew 1.1% year on year to $1.62 billion, and adjusted earnings per share came in at $0.69, both topping estimates. While sales volumes increased by a strong 8% year on year, the gain was largely offset by weaker pricing. The primary driver for the stock's sharp decline appeared to be the company's guidance.
Lamb Weston reconfirmed its full-year forecast, with the midpoints for both its projected revenue and EBITDA (a key measure of profitability) landing below what Wall Street had anticipated, disappointing investors and signaling a challenging road ahead.
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What Is The Market Telling Us
Lamb Weston’s shares are not very volatile and have only had 9 moves greater than 5% over the last year. Moves this big are rare for Lamb Weston and indicate this news significantly impacted the market’s perception of the business.
The biggest move we wrote about over the last year was 5 months 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 32.7% since the beginning of the year, and at $44.47 per share, it is trading 33.6% below its 52-week high of $67 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 $573.99.
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