Revenue Beat: Lamb Weston Holdings, Inc. Exceeded Revenue Forecasts By 5.6% And Analysts Are Updating Their Estimates
Investors in Lamb Weston Holdings, Inc. (NYSE:LW) had a good week, as its shares rose 5.4% to close at US$90.70 following the release of its quarterly results. It was a workmanlike result, with revenues of US$1.0b coming in 5.6% ahead of expectations, and statutory earnings per share of US$0.95, in line with analyst appraisals. Analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
View our latest analysis for Lamb Weston Holdings
Taking into account the latest results, the most recent consensus for Lamb Weston Holdings from seven analysts is for revenues of US$4.04b in 2020, which is a reasonable 2.6% increase on its sales over the past 12 months. Statutory earnings per share are expected to accumulate 4.1% to US$3.62. Yet prior to the latest earnings, analysts had been forecasting revenues of US$4.02b and earnings per share (EPS) of US$3.42 in 2020. Analysts seem to have become more bullish on the business, judging by their new earnings per share estimates.
The consensus price target rose 9.7% to US$91.89, suggesting that higher earnings estimates flow through to the stock's valuation as well. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values Lamb Weston Holdings at US$103 per share, while the most bearish prices it at US$57.00. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.
It can also be useful to step back and take a broader view of how analyst forecasts compare to Lamb Weston Holdings's performance in recent years. It's pretty clear that analysts expect Lamb Weston Holdings's revenue growth will slow down substantially, with revenues next year expected to grow 2.6%, compared to a historical growth rate of 8.6% over the past three years. Juxtapose this against the other companies in the market with analyst coverage, which are forecast to grow their revenues (in aggregate) 2.8% next year. Factoring in the forecast slowdown in growth, it looks like analysts are expecting Lamb Weston Holdings to grow at about the same rate as the wider market.
The Bottom Line
The biggest takeaway for us from these new estimates is that the consensus upgraded its earnings per share estimates, showing a clear improvement in sentiment around Lamb Weston Holdings's earnings potential next year. Happily, there were no real changes to sales forecasts, with the business still expected to grow in line with the overall market. There was also a nice increase in the price target, with analysts feeling that the intrinsic value of the business is improving.
Still, 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 2022, and you can see them free on our platform here.
You can also view our analysis of Lamb Weston Holdings's balance sheet, and whether we think Lamb Weston Holdings is carrying too much debt, for free on our platform here.
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