Lamb Weston's (LW) Latest Move to Boost Shareholders' Wealth
Lamb Weston Holdings, Inc. LW is on track with strategies to fuel sustainable and profitable growth while enhancing shareholder returns. The company revealed its updated long-term financial goals at the 2023 Investor Day. Management also raised its share repurchase authorization.
Strategic Growth Efforts on Track
Lamb Weston is focused on accelerating growth in the booming frozen potato category. In this regard, the company’s global manufacturing footprint, with cutting-edge production capabilities, are yielding. Lamb Weston’s sturdy balance sheet allows it to maintain financial flexibility. The company’s global supply chain optimization initiatives and disciplined capital allocation strategy has created a more profitable and high-growth business.
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The company boasts a long-standing customer relationship, which is noteworthy. It offers an impressive product portfolio. Management’s focus on innovations creates opportunities to drive growth and widen the total addressable market.
Measures To Boost Shareholder Wealth
Lamb Weston returns wealth to shareholders through share repurchases and dividends. The company increased its share repurchase authorization to $500 million, which includes nearly $124 million of its unused capacity. Lamb Weston is targeting a dividend payout ratio of 25%-35% of net income, aside from the opportunistic share buybacks. Management is on track to leverage its solid cash flow, which will continue to help the company return cash to shareholders.
Long-Term Goals
Management expects to deliver low-to-mid-single-digit net sales growth in the long term, courtesy of favorable price and mix and volume growth. Lamb Weston looks to achieve an adjusted EBITDA growth in the mid-to-high-single digits. The upside can be attributed to positive net price realization, improved mix, supply chain productivity and SG&A leverage.
In the long-term, adjusted earnings per share (EPS) are likely to grow in the high single digits, fueled by the execution of the company’s capital allocation strategies like share repurchases and a flexible capital structure.
Selling, general and administrative expenses, excluding advertising and promotion expenses, will be around 10.5-11% of net sales. Capital expenditures are likely to be nearly 9% of net sales. Management expects net debt to adjusted EBITDA leverage ratio of up to 3.5 times.
Fiscal 2024 Outlook Reaffirmed
For fiscal 2024, management expects net sales in the range of $6.8-$7.0 billion. The company anticipates net income in the range of $800-$870 million during the year. Diluted EPS are envisioned in the range of $5.47-$5.92. Management expects adjusted net income between $805 and $875 million and adjusted EBITDA will likely come in the $1,540-$1,620 million range. The company anticipated adjusted EPS of $5.50 to $5.95 during fiscal 2024.
The Zacks Rank #1(Strong Buy) stock has gained 2.8% year-to-date against the industry’s 19.2% decline.
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