Idaho-based Lamb Weston Holdings (LW) supplies frozen potato, sweet potato, appetizer, and vegetable products to retailers and restaurants around the world. The company has been in business for more than 70 years.
Let’s take a look at Lamb Weston’s latest financial performance, corporate updates, and risk factors. (See Lamb Weston Holdings stock charts on TipRanks).
Fiscal Q4 Financial Results
The company reported revenue of $1.01 billion for its Fiscal 2021 fourth-quarter, representing a 19% year-over-year increase. It posted diluted EPS of $0.44, compared to a loss per share of $0.01 in the same quarter last year.
For the Fiscal 2021 full year, revenue declined 3% to $3.67 billion. EPS also declined to $2.16 from $2.49 in the previous year.
Lamb Weston CEO Tom Werner said that Fiscal 2021 presented the most challenging operating environment in the company’s history. The executive said that he believed the worst of the COVID-19 pandemic’s effect on Lamb Weston’s business has passed. Lamb Weston anticipates revenue growth in the low-to-mid single digits in Fiscal 2022. The consensus estimate calls for revenue of $3.59 billion. The company plans to report its Fiscal 2022 first-quarter results on October 7.
Corporate Updates
The company plans to distribute a quarterly dividend of $0.235 per share on December 3 to shareholders of record on November 5. During Fiscal 2021, the company paid out $135.3 million in dividends and spent $25.7 million on share repurchases. In total, Lamb Weston returned $161 million to shareholders in Fiscal 2021. The company has $170 million remaining under its current share repurchase program.
Lamb Weston plans to invest $415 million to upgrade its facility in American Falls. The upgrade will add a new processing line that can produce 350 million pounds of potato products per year. The company expects to complete the American Falls facility expansion and modernization in the second half of Fiscal 2023.
The company is also constructing a new processing facility in Inner Mongolia. The facility will be able to produce 250 million pounds of potato products per year. Lamb Weston expects to invest $250 million to set up the new Inner Mongolia facility. It hopes to complete the project in the first half of Fiscal 2024.
Risk Factors
The new TipRanks Risk Factors tool shows 29 risk factors for Lamb Weston. The company introduced two new risk factors in its Fiscal 2021 annual report.
In a newly added Tech and Innovation risk factor, Lamb Weston tells investors that the success of its business relies heavily on its intellectual property rights. It cautions that failure to protect its intellectual property or loss of licensed intellectual property could reduce the value of its brands and products. It also warns that intellectual property disputes may be costly and divert management’s attention from business operations. Tech and Innovation accounts for 10 percent of the company’s total risk factors.
Lamb Weston tells investors in a newly added Production risk factor that its operations depend on a wide range of third parties. These include suppliers, warehouse partners, co-packers, and transport providers. The company cautions that if the third parties fail to fulfill their commitments, it could face manufacturing disruptions and shipment delays. As a result, its costs could increase, and it could also lose revenue. Production issues account for 21% of the company’s total risk factors.
The majority of Lamb Weston’s risk factors fall under the Ability to Sell category, with 24% of the total risks. That is above the sector average of 19%. Lamb Weston’s shares have declined about 22% since the beginning of 2021.
Analysts’ Take
In August, Jefferies analyst Robert Dickerson reiterated a Buy rating on Lamb Weston stock without assigning it a price target.
Consensus among analysts is a Strong Buy based on 3 Buys. The average Lamb Weston Holdings price target of $80 implies 30.36% upside potential to current levels.
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