Lamb Weston Q2 profit jumps 55%, beats estimates

Frozen foods supplier Lamb Weston Holdings (LW) reported a 55% jump in earnings for the second quarter of fiscal 2019 helped by pricing actions, favorable mix, and growth in its Global and Retail segments. The results exceeded analysts expectations. The company raised its net sales growth guidance for the full year 2019.

Net income climbed 55% to $119 million and earnings jumped 42% to $0.74 per share. A lower corporate tax rate related to the US Tax Act increased diluted earnings by $0.10 per share and the balance increase reflects growth in income from operations. Adjusted earnings grew 48% to $0.80 per share.

Net sales increased 11% to $911.4 million. Price/mix increased 6% due to pricing actions and favorable mix. Volume rose 5% driven by growth in the company’s Global and Retail segments.

Looking ahead into fiscal 2019, the company lifted its net sales growth outlook to the mid-to-high single digit range from the prior mid-single digit range. Price/mix is predicted to be higher in the first half of fiscal 2019 versus the second half, reflecting the carryover impact of customer contract pricing structures that took effect beginning in the second half of fiscal 2018.

Adjusted EBITDA including unconsolidated joint ventures are anticipated to be in the range of $870 million to $880 million, up from the prior outlook of $860 million to $870 million. The company expects the gross profit dollar growth rate to be at least in line with net sales growth. Cash used for capital expenditures is projected to be about $360 million.

For the second quarter, net sales from the Global segment was $470 million, up 13% from the prior-year quarter. Price/mix increased 7% reflecting the carryover impact of pricing actions taken in the prior year as well as improved mix. Volume rose 6% driven by growth in sales to strategic customers in the US and key international markets, as well as the benefit of limited time product offerings.

Lamb Weston beats Q1 revenue and profit estimates

Net sales from the Foodservice segment for the second quarter was $279.7 million, up 3% from the prior year period. Price/mix increased 5% reflecting the carryover impact of pricing actions taken in the prior year as well as improved mix. However, volume declined 2% largely due to the loss of some lower-margin volume, partially offset by growth of sales of higher-margin products.

Sales from the Retail segment climbed by 21% to $123.9 million. Volume grew 16% on distribution gains of Grown in Idaho and other branded products, as well as private label products. Price/mix inched up 5% on higher prices across the branded and private label portfolios, as well as improved mix.

The company increased its quarterly dividend by about 5%, enabling it to maintain a dividend payout range of 25% to 35% of adjusted EPS. Lamb Weston adopted a $250 million share repurchase program designed to buy back stock on an opportunistic basis.

Shares of Lamb Weston opened higher on Friday and is trading in the green territory. The stock has risen over 34% in the past year and over 4% in the past three months.

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