Lamb Weston (LW): What does the food company anticipate for the latter half of 2024?

Shares of Lamb Weston Holdings, Inc. (NYSE: LW) stayed red on Tuesday. The stock has gained 10% over the past three months. The company delivered strong results for the second quarter of 2024 and hiked its earnings guidance for the full year as it expects a generally stable operating environment through the remainder of the period.

Strong Q2 performance

Lamb Weston delivered strong sales and earnings growth in the second quarter of 2024. Net sales increased 36% year-over-year to $1.73 billion, driven mainly by incremental sales from the acquisition of the company’s EMEA business. The company will receive the incremental benefit from the consolidation of this business in the third quarter of 2024 as well.

Net sales growth was 6%, excluding the EMEA acquisition. The second quarter results benefited from pricing actions implemented by the company across its segments to tackle inflation. The exiting of lower-margin business last year led to a 6% decline in volume in Q2, but the volume performance was better on a sequential basis, reflecting resilient demand and the addition of new business to replace the volumes from the exited business.  

Lamb Weston’s GAAP earnings more than doubled to $1.48 per share in Q2 2024 compared to the same period last year. Adjusted EPS rose 15% year-over-year to $1.45.

The frozen potato products seller saw sales growth across both its segments during the second quarter. Sales in the North America segment increased 10% YoY, benefiting from pricing actions and favorable mix. Demand in the US remained sturdy with stable fry attachment rates.

In the International segment, sales more than doubled YoY to $565 million, driven by the incremental sales from the EMEA acquisition. Excluding the EMEA acquisition, net sales for the segment decreased 12%. The international business also benefited from pricing and favorable mix, as well as restaurant traffic growth in most of its key international markets.

FY2024 outlook

As stated in its earnings report, Lamb Weston anticipates that the consumer and operating environment will remain generally stable through the remainder of fiscal year 2024. Based on this, the company reaffirmed its sales target and raised its earnings outlook for the full year.

LW expects net sales of $6.8-7.0 billion for FY2024. This includes $1.1-1.2 billion of incremental sales from the EMEA business. Excluding the EMEA sales, the company expects net sales growth of 6.5-8.5%.

The company expects price/mix to be up low-double-digits for the year, with a sequential slowdown in the second half versus the first half as it laps last year’s pricing actions. Volume, excluding acquisitions, is expected to be down mid-single-digits.

Segment volume trends are expected to improve in the latter half of the year as LW laps some of the volume from the exited low-margin businesses and as it backfills the exited business with more profitable business. Volume growth is expected to be positive in the fourth quarter of 2024.

Lamb Weston raised its earnings guidance for the year and now expects both GAAP and adjusted net income to range between $830-900 million and GAAP and adjusted EPS to range between $5.70-6.15. The company’s previous expectations were for GAAP net income of $800-870 million, or $5.47-5.92 per share, and adjusted net income of $805-875 million, or $5.50-5.95 per share.