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Category: Stock Market and Lamb Weston
Date: 2 October 2019 Stock Price: $73.57 We take a look at the 1st quarter earnings report of their 2020 fiscal year of Lamb Weston a leading supplier of frozen potatoes, sweet potato, appetizer and vegetable products to restaurants and retailers around the world.
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About Lamb Weston
Lamb Weston is a leading supplier of frozen potato, sweet potato, appetizer and vegetable products to restaurants and retailers around the world. For more than 60 years, Lamb Weston has led the frozen potato industry in innovation, introducing inventive products for our customers. Lamb Weston products can be found in more than 100 countries around the world. The business is headquartered in Eagle, Idaho, with manufacturing operations focused in the Pacific Northwest, primarily in the world’s best potato-growing region, the Columbia River Basin. Lamb Weston employs more than 6,000 people around the world in sales offices, manufacturing plants and corporate offices
Overview of Lamb Weston's latest earnings report
- Net sales: $989 million (up from $914.9 million for the same quarter of the previous year
- Net sales increased by 8.09% over the last 12 months
- Cost of sales: $740.4 million (up from $684.3 million for the same quarter of the previous year)
- Cost of sales increased by 8.1% over the last 12 months
- Net income: 115.7 million (up from $107.8 million for the same quarter of the previous year)
- Diluted earnings per share: $0.79 (up from $0.73 for the same quarter of the previous year)
- Dividend declared: $0.20
- Dividend yield: 4%
- Diluted weighted-average shares outstanding: 147 million (down from 147.2 million for the same quarter of the previous year)
- Cash and cash equivalents: $19 million
- Cash and cash equivalents per share: $0.13
- Cash and cash equivalents makes up 0.17% of Lamb Weston's market capital
- Cash and cash equivalents makes up 0.58% of Lamb Weston's total assets
- Accounts receivable: $371.1 million
- Accounts receivable makes up 11.5% of Lamb Weston's total assets
- Inventories: $466.5 million
- Inventories makes up 14.47% of Lamb Weston's total assets
- Stockholders equity of Lamb Weston: $92.3 million
- Stockholders equity per share for Lamb Weston's : $0.62
- So Lamb Weston is trading at 118 times it stockholders equity per share which is well outside the expected range of between 2 and 4 times most companies tend to trade at.
- Cash provided by operating activities: $238.5 million
- Cash provided by operating activities per share: $1.62
Lamb Weston's management commentary on the results and earnings guidance
EAGLE, Idaho--(BUSINESS WIRE)-- Lamb Weston Holdings, Inc. (NYSE: LW) announced today its fiscal first quarter 2020 results.
“We’re pleased with our solid start to our fiscal year, with each of our core business segments driving volume, price/mix and earnings growth,” said Tom Werner, President and CEO. “We continue to leverage our sales and innovation capabilities to support customers’ growth, as well as to support pricing actions and improve product mix. We’re making good progress on our new ERP system, while also continuing to integrate our recent acquisitions in Australia. And our new Hermiston, Oregon french fry line is fully operational, providing us with flexibility to service and upgrade other production lines that have been operating at peak capacity.”
“We remain on track to deliver our fiscal 2020 targets, reflecting our continued focus on execution and a generally favorable current operating environment. In North America, demand for frozen potato products is solid behind positive restaurant traffic trends, while manufacturing capacity remains relatively tight. In addition, on a preliminary basis, we believe the potato crop in our growing regions will be in line with long-term averages. In Europe, we anticipate that our joint venture’s performance will gradually improve as we put the challenges from last year’s poor potato crop behind us. In our key international markets, french fry demand continues to grow in line with recent trends. Nonetheless, while current global french fry demand is strong, we are monitoring signs of softening macroeconomic conditions. Although these conditions may temper the frozen potato category’s demand growth towards more normalized rates, we believe we are well-positioned to deliver our financial objectives for the year, and remain focused on creating value for our stakeholders over the long term.”
Outlook
The Company provides guidance on its financial outlook on a non-GAAP basis and does not reconcile guidance to GAAP as the Company cannot predict items impacting comparability that are included in reported GAAP results. These items are discussed in more detail in the notes to this press release.The Company’s fiscal 2020 outlook includes the contribution of a 53rd week in the fiscal period, with the additional week falling in the fourth quarter.
“We’re pleased with our solid start to our fiscal year, with each of our core business segments driving volume, price/mix and earnings growth,” said Tom Werner, President and CEO. “We continue to leverage our sales and innovation capabilities to support customers’ growth, as well as to support pricing actions and improve product mix. We’re making good progress on our new ERP system, while also continuing to integrate our recent acquisitions in Australia. And our new Hermiston, Oregon french fry line is fully operational, providing us with flexibility to service and upgrade other production lines that have been operating at peak capacity.”
“We remain on track to deliver our fiscal 2020 targets, reflecting our continued focus on execution and a generally favorable current operating environment. In North America, demand for frozen potato products is solid behind positive restaurant traffic trends, while manufacturing capacity remains relatively tight. In addition, on a preliminary basis, we believe the potato crop in our growing regions will be in line with long-term averages. In Europe, we anticipate that our joint venture’s performance will gradually improve as we put the challenges from last year’s poor potato crop behind us. In our key international markets, french fry demand continues to grow in line with recent trends. Nonetheless, while current global french fry demand is strong, we are monitoring signs of softening macroeconomic conditions. Although these conditions may temper the frozen potato category’s demand growth towards more normalized rates, we believe we are well-positioned to deliver our financial objectives for the year, and remain focused on creating value for our stakeholders over the long term.”
Outlook
The Company provides guidance on its financial outlook on a non-GAAP basis and does not reconcile guidance to GAAP as the Company cannot predict items impacting comparability that are included in reported GAAP results. These items are discussed in more detail in the notes to this press release.The Company’s fiscal 2020 outlook includes the contribution of a 53rd week in the fiscal period, with the additional week falling in the fourth quarter.
- Net sales to grow mid-single digits, largely driven by volume as well as modestly higher price/mix.
- Adjusted EBITDA including unconsolidated joint ventures(1) in the range of $950 million to $970 million. The Company expects:
- Volume-driven gross profit growth, with higher price/mix offsetting input cost inflation;
- SG&A, excluding advertising and promotional expenses and investments to upgrade the Company’s enterprise resource planning and other information systems infrastructure, to be 8.0 percent to 8.5 percent of net sales.
- Equity method investment earnings to improve versus fiscal 2019, reflecting the effect of a normalized raw potato cost environment in Europe.
- The Company increased its target for capital expenditures to approximately $300 million from approximately $275 million to reflect updated spending estimates for the upgrade of its enterprise resource planning system and other capital projects.
Lamb Weston (NYSE: LW) stock price history
The image below, obtained from Google, shows the stock price history of Lamb Weston (NYSE:LW) since their listing. And it's been a very good time for Lamb Weston stockholders. At their listing in November 2016 they were trading around $33.50 a stock and they are currently trading at $73.57 a stock. That is a return of 119% provided in the last three years, which is very good returns indeed. The stock is also trading at closer to its 52 week high of $83.86 than it is to its 52 week low of $58.83 which to us is a clear indication that the momentum and sentiment towards Lamb Weston's stock is positive.
Recent coverage of Lamb Weston
The extract below shows the latest coverage of Lamb Weston as obtained from Zacks.
Lamb Weston (LW - Free Report) came out with quarterly earnings of $0.79 per share, missing the Zacks Consensus Estimate of $0.80 per share. This compares to earnings of $0.73 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of -1.25%. A quarter ago, it was expected that this frozen foods supplier would post earnings of $0.72 per share when it actually produced earnings of $0.74, delivering a surprise of 2.78%.
Over the last four quarters, the company has surpassed consensus EPS estimates three times. Lamb Weston, which belongs to the Zacks Food - Miscellaneous industry, posted revenues of $989 million for the quarter ended August 2019, surpassing the Zacks Consensus Estimate by 1.77%. This compares to year-ago revenues of $914.90 million. The company has topped consensus revenue estimates four times over the last four quarters.
The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call. Lamb Weston shares have added about 0% since the beginning of the year versus the S&P 500's gain of 17.3%.
Read the full article here
Lamb Weston (LW - Free Report) came out with quarterly earnings of $0.79 per share, missing the Zacks Consensus Estimate of $0.80 per share. This compares to earnings of $0.73 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of -1.25%. A quarter ago, it was expected that this frozen foods supplier would post earnings of $0.72 per share when it actually produced earnings of $0.74, delivering a surprise of 2.78%.
Over the last four quarters, the company has surpassed consensus EPS estimates three times. Lamb Weston, which belongs to the Zacks Food - Miscellaneous industry, posted revenues of $989 million for the quarter ended August 2019, surpassing the Zacks Consensus Estimate by 1.77%. This compares to year-ago revenues of $914.90 million. The company has topped consensus revenue estimates four times over the last four quarters.
The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call. Lamb Weston shares have added about 0% since the beginning of the year versus the S&P 500's gain of 17.3%.
Read the full article here
Lamb Weston (NYSE: LW) latest stock valuation
So what is Lamb Weston (NYSE: LW) stock worth based on the release of their latest earnings report and their outlook provided? Based on their earnings report and the fiscal guidance provided our valuation models provide a target (full value) price for Lamb Weston of $76.20 a stock. We therefore believe that the stock is slightly undervalued.
We usually suggest long term investors look to enter a stock at least 10% below our target (full value) price which in this case is $76.20. So a good entry point into Lamb Weston stock would be at $68.60 or below.
We usually suggest long term investors look to enter a stock at least 10% below our target (full value) price which in this case is $76.20. So a good entry point into Lamb Weston stock would be at $68.60 or below.