Lamb Weston’s (NYSE:LW) Q3: Beats On Revenue, Full-Year Sales Guidance Is Optimistic
Potato products company Lamb Weston (NYSE:LW) beat Wall Street’s revenue expectations in Q3 CY2024, but sales were flat year on year at $1.65 billion. The company’s full-year revenue guidance of $6.7 billion at the midpoint also came in 1.2% above analysts’ estimates. Its non-GAAP profit of $0.73 per share was also 1.7% above analysts’ consensus estimates.
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Lamb Weston (LW) Q3 CY2024 Highlights:
- Revenue: $1.65 billion vs analyst estimates of $1.55 billion (6.5% beat)
- EPS (non-GAAP): $0.73 vs analyst estimates of $0.72 (1.7% beat)
- The company reconfirmed its revenue guidance for the full year of $6.7 billion at the midpoint
- EPS (non-GAAP) guidance for the full year is $4.25 at the midpoint, missing analyst estimates by 5.1%
- EBITDA guidance for the full year is $1.43 billion at the midpoint, above analyst estimates of $1.41 billion
- Gross Margin (GAAP): 21.5%, down from 31.3% in the same quarter last year
- EBITDA Margin: 17.5%, down from 23.9% in the same quarter last year
- Free Cash Flow Margin: 0.3%, down from 4% in the same quarter last year
- Organic Revenue fell 1% year on year (48% in the same quarter last year)
- Sales Volumes fell 3% year on year (25% in the same quarter last year)
- Market Capitalization: $9.30 billion
“We delivered first quarter financial results that were generally in line with our expectations, driven by sequentially improved volume performance, solid price/mix, and strict management of operating costs,” said Tom Werner, President and CEO.
Company Overview
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 Food
As 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 Growth
Lamb 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 19.5% over the last three years was impressive as consumers bought more of its products.
This quarter, Lamb Weston’s revenue fell 0.7% year on year to $1.65 billion but beat Wall Street’s estimates by 6.5%. Looking ahead, Wall Street expects sales to grow 4.1% over the next 12 months, an acceleration from this quarter.
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Volume Growth
Revenue 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 8.8%. Even with this splendid performance, we can see that most of the company’s gains have come from price increases by looking at its 24.9% average organic revenue growth. The ability to sell more products while raising prices indicates Lamb Weston enjoys inelastic demand.
In Lamb Weston’s Q3 2025, sales volumes dropped 3% year on year. This result was a reversal from the 25% year-on-year increase it posted 12 months ago. A one quarter hiccup shouldn’t deter you from investing in a business. We’ll be monitoring the company to see how things progress.
Key Takeaways from Lamb Weston’s Q3 Results
We were impressed by how significantly Lamb Weston blew past analysts’ organic revenue growth expectations this quarter. We were also excited its EPS outperformed Wall Street’s estimates. On the other hand, its gross margin missed analysts’ expectations and it lowered its full-year EPS guidance. Overall, this quarter was mixed. The areas below expectations seem to be driving the stock move, and the stock traded down 1% to $64.23 immediately after reporting.
Is Lamb Weston an attractive investment opportunity right now?If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings.We cover that in our actionable full research report which you can read here, it’s free.
