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Factors to Watch Ahead of Lamb Weston's (LW) Q1 Earnings Release

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Lamb Weston Holdings, Inc. LW is likely to display year-over-year growth in the top line, when it reports first-quarter fiscal 2022 numbers on Oct 7. The Zacks Consensus Estimate for revenues is pegged at $993 million, suggesting a rise of nearly 14% from the prior-year quarter’s reported figure.

The Zacks Consensus Estimate for earnings has moved 4.9% south over the past seven days to 39 cents per share, which, indicates a slump of 36.1% from the figure reported in the prior-year period. In the last reported quarter, the company delivered an earnings surprise of 2.3%. This producer, distributer and marketer of value-added frozen potato products has a trailing four-quarter earnings surprise of 25.1%, on average.

Lamb Weston Holdings Inc. Price, Consensus and EPS Surprise

Lamb Weston Holdings Inc. Price, Consensus and EPS Surprise
Lamb Weston Holdings Inc. Price, Consensus and EPS Surprise

Lamb Weston Holdings Inc. price-consensus-eps-surprise-chart | Lamb Weston Holdings Inc. Quote

Key Factors to Note

Lamb Weston has been seeing elevated costs for a while now. In the fourth quarter of fiscal 2021, SG&A expenses flared up to $18.9 million due to elevated incentive compensation accruals and investments to enhance the company’s manufacturing, commercial and supply-chain operations. Also, a rise in advertising and promotion expenses led to this upside. Apart from this, the lingering impact of the pandemic and the sudden recovery of the broader U.S. economy have hurt the overall supply chain of the industry. Management, on its last earnings call, stated that supply-chain disruptions, significant input and transportation cost inflation, and a tough labor market are likely to put pressure on the company’s earnings in the near term.

Net income and adjusted EBITDA (including unconsolidated joint ventures) are likely to be under pressure in the first half of fiscal 2022. Management expects supply-chain volatility as well as considerable cost inflation of key production inputs, packaging and transportation from the year-ago period. Apart from these, Lamb Weston said that it expects operating expenses to see pressure in the near term from continued investments in supply-chain, commercial and manufacturing operations.

Apart from this, the company’s Retail segment is seeing tough comparisons with the year-ago period’s demand surge, stemming from an increased at-home consumption of frozen potato products, together with the reduced shipments of private-label products. That said, the rebound in the away-from-home frozen potato product demand, with the pandemic-led curbs on restaurants and other foodservice locations being lifted, has been working well for Lamb Weston. The company, on its fourth-quarter earnings call, stated that it remains encouraged about the recovering restaurant traffic in the United States, particularly at the full-service restaurants. Lamb Weston then said that it expects demand in Europe and the key export markets to improve with the increased availability of vaccines in the regions.

The company has also been benefiting from its robust price/mix as well as efforts to boost offerings and capacity. This enables the company to effectively meet the rising demand conditions for snacks and fries.

What the Zacks Model Unveils

Our proven model doesn’t conclusively predict an earnings beat for Lamb Weston this time around. The combination of a positive Earnings ESP, and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Lamb Weston currently carries a Zacks Rank #4 and has an Earnings ESP of -2.56%.

Stocks With Favorable Combinations

Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this season.

Hershey HSY has an Earnings ESP of +3.82% and carries a Zacks Rank #3, at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Kellogg K has an Earnings ESP of +2.51% and currently holds a Zacks Rank #3.

PepsiCo, Inc. PEP has an Earnings ESP of +0.23% and carries a Zacks Rank #3, currently.

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Hershey Company The (HSY) : Free Stock Analysis Report

PepsiCo, Inc. (PEP) : Free Stock Analysis Report

Kellogg Company (K) : Free Stock Analysis Report

Lamb Weston Holdings Inc. (LW) : Free Stock Analysis Report

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