Potato products company Lamb Weston (NYSE:LW) missed analysts' expectations in Q1 CY2024, with revenue up 16.3% year on year to $1.46 billion. The company's full-year revenue guidance of $6.57 billion at the midpoint also came in 4.5% below analysts' estimates. It made a non-GAAP profit of $1.20 per share, down from its profit of $1.43 per share in the same quarter last year.
Is now the time to buy Lamb Weston? Find out by reading the original article on StockStory.
Lamb Weston (LW) Q1 CY2024 Highlights:
- Revenue: $1.46 billion vs analyst estimates of $1.65 billion (11.8% miss)
- EPS (non-GAAP): $1.20 vs analyst expectations of $1.45 (17.3% miss)
- The company dropped its revenue guidance for the full year from $6.9 billion to $6.57 billion at the midpoint, a 4.8% decrease
- Gross Margin (GAAP): 27.7%, down from 31.7% in the same quarter last year
- Free Cash Flow was -$229.5 million compared to -$119.7 million in the previous quarter
- Organic Revenue was up 16% year on year
- Sales Volumes were up 12% year on year
- Market Capitalization: $14.6 billion
Best known for its Grown in Idaho brand, Lamb Weston (NYSE:LW) produces and distributes potato products such as frozen french fries and mashed potatoes.
Shelf-Stable FoodAs America industrialized and moved away from an agricultural economy, people faced more demands on their time. Packaged foods emerged as a solution offering convenience to the evolving American family, whether it be canned goods or snacks. Today, Americans seek brands that are high in quality, reliable, and reasonably priced. Furthermore, there's a growing emphasis on health-conscious and sustainable food options. Packaged food stocks are considered resilient investments. People always need to eat, so these companies can enjoy consistent demand as long as they stay on top of changing consumer preferences. The industry spans from multinational corporations to smaller specialized firms and is subject to food safety and labeling regulations.
Sales GrowthLamb Weston is larger than most consumer staples companies and benefits from economies of scale, giving it an edge over its smaller competitors.
As you can see below, the company's annualized revenue growth rate of 23.1% over the last three years was excellent as consumers bought more of its products.
This quarter, Lamb Weston's revenue grew 16.3% year on year to $1.46 billion, falling short of Wall Street's estimates. Looking ahead, Wall Street expects sales to grow 9.4% over the next 12 months, a deceleration from this quarter.
Volume GrowthRevenue growth can be broken down into changes in price and volume (the number of units sold). While both are important, volume is the lifeblood of a successful staples business as there’s a ceiling to what consumers will pay for everyday goods; they can always trade down to non-branded products if the branded versions are too expensive.
To analyze whether Lamb Weston generated its growth from changes in price or volume, we can compare its volume growth to its organic revenue growth, which excludes non-fundamental impacts on company financials like mergers and currency fluctuations.
Over the last two years, Lamb Weston's average quarterly volume growth was a robust 9.4%. Even with this splendid performance, we can see that most of the company's gains have come from price increases by looking at its 29.1% average organic revenue growth. The ability to sell more products while raising prices indicates Lamb Weston enjoys inelastic demand.
In Lamb Weston's Q1 2024, sales volumes jumped 12% year on year.
Key Takeaways from Lamb Weston's Q1 Results We struggled to find many strong positives in these results. Its revenue and EPS missed analysts' estimates as the company's transition to a new enterprise resource planning system (ERP) significantly disrupted its operations. According to management, the "ERP transition temporarily reduced the visibility of finished goods inventories located at distribution centers, which affected our ability to fill customer orders. In turn, this pressured sales volume and margin performance". Lamb Weston also noted soft demand for restaurants in general and lowered its full-year revenue and EPS guidance, missing Wall Street's estimates. Overall, this was a bad quarter for Lamb Weston. The company is down 11.9% on the results and currently trades at $89.02 per share.