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Results: Lamb Weston Holdings, Inc. Exceeded Expectations And The Consensus Has Updated Its Estimates

Simply Wall St
·4 mins read

Investors in Lamb Weston Holdings, Inc. (NYSE:LW) had a good week, as its shares rose 7.8% to close at US$73.21 following the release of its first-quarter results. It looks like a credible result overall - although revenues of US$872m were what the analysts expected, Lamb Weston Holdings surprised by delivering a (statutory) profit of US$0.61 per share, an impressive 74% above what was forecast. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.

Check out our latest analysis for Lamb Weston Holdings

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earnings-and-revenue-growth

After the latest results, the consensus from Lamb Weston Holdings' six analysts is for revenues of US$3.59b in 2021, which would reflect a noticeable 2.4% decline in sales compared to the last year of performance. Statutory earnings per share are predicted to accumulate 3.8% to US$2.41. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$3.67b and earnings per share (EPS) of US$2.38 in 2021. The consensus seems maybe a little more pessimistic, trimming their revenue forecasts after the latest results even though there was no change to its EPS estimates.

The consensus price target rose 9.4% to US$73.88, with the analysts apparently satisfied with the business performance despite lower revenue forecasts. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic Lamb Weston Holdings analyst has a price target of US$82.00 per share, while the most pessimistic values it at US$60.00. This is a very narrow spread of estimates, implying either that Lamb Weston Holdings is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.

Of course, another way to look at these forecasts is to place them into context against the industry itself. We would highlight that sales are expected to reverse, with the forecast 2.4% revenue decline a notable change from historical growth of 6.2% over the last three years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 3.1% next year. It's pretty clear that Lamb Weston Holdings' revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The most obvious conclusion is that there's been no major change in the business' prospects in recent times, with the analysts holding their earnings forecasts steady, in line with previous estimates. Unfortunately, they also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. Even so, earnings are more important to the intrinsic value of the business. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.

Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for Lamb Weston Holdings going out to 2025, and you can see them free on our platform here.

Even so, be aware that Lamb Weston Holdings is showing 1 warning sign in our investment analysis , you should know about...

This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.