Earnings season is kind to some stocks, and merciless to others. Unfortunately for potato products supplier Lamb Weston (NYSE: LW), it fell into the latter category following the release of its latest set of quarterly results on Wednesday. What didn’t help was a series of analyst price target recommendation downgrades and price target cuts in the wake of those results.
The subsequent market rout pushed Lamb Weston’s share price down a queasy 32% week-to-date as of early Friday morning, according to data compiled by S&P Global Market Intelligence.
Lamb Weston published its fourth quarter of fiscal 2024 numbers before market open that day, and it was greeted with a heavy investor sell-off once trading began. The company’s net sales fell by 5% on a year-over-year basis to $1.6 billion, while its non-GAAP (adjusted) net income fell a great deal more steeply. That line item cratered by 40% to just under $114 million.
In its earnings release, CEO Tom Warner said, “Our price/mix results were below our expectations, while market share losses and a slowdown in restaurant traffic in the U.S. and many of our key international markets were greater than we expected.“
Speaking of expectations, the company didn’t come close to those held by analysts. Collectively, pundits following the stock were anticipating $1.7 billion on the top line, and $1.26 per share for adjusted net income. Management’s full-year fiscal 2025 guidance also fell short of analyst projections.
With such a wide net income miss, it’s little wonder that a clutch of prognosticators quickly cut their Lamb Weston price targets. Several even downgraded their recommendations on the shares from the equivalent of buy to hold.
Among the downgraders was TD Cowen’s Robert Moskow, who wrote in a research note, “The thesis we laid out last year regarding tight potato processing industry capacity utilization, strong pricing power, and LW enhancing its mix by walking away from unprofitable business did not play out.”
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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