Lamb Weston (LW) Misses Q3 EPS by 16c, Revenues Miss; Withdraws FY20 Sales Growth Guidance

Lamb Weston (NYSE: LW) reported Q3 EPS of $0.77, $0.16 worse than the analyst estimate of $0.93. Revenue for the quarter came in at $937 million versus the consensus estimate of $959.19 million.

Third Quarter 2020 Highlights

• Net sales increased 1% to $937 million
• Income from operations declined 16% to $163 million
• Net income declined 21% to $111 million
• Adjusted EBITDA including unconsolidated joint ventures(1) declined 10% to $228 million
• Diluted EPS declined 20% to $0.76 from $0.95
• Adjusted Diluted EPS(1) declined 19% to $0.77 from $0.95

“Our results in the third quarter were mixed,” said Tom Werner, President and CEO. “We drove solid growth in our Foodservice and Retail segments, but our Global segment’s sales declined due to the timing of sales of customized products and higher-margin limited time offering products, as well as the initial effects of the COVID-19 pandemic on restaurant traffic in China. In addition, all our segments had fewer shipping days related to the timing of the Thanksgiving holiday. We also realized the impact of higher-than-expected input and fixed cost inflation, which pressured earnings.”

“While the operating environment in most of our markets during the fiscal third quarter was favorable, estimates on the COVID-19 pandemic’s effect on the global economy are uncertain,” Werner continued. “At this time, despite only two months remaining in our fiscal fourth quarter, we are unable to reasonably forecast frozen potato product demand because of the pandemic’s unpredictable near-term effect on restaurant traffic in North America and our key international markets. As a result, we’re withdrawing our financial outlook for the remainder of our fiscal year.”

“During these uncertain times, our top priorities are to ensure the health and welfare of our employees, maintain product safety, and continue to support our customers as they work to manage their supply chains and inventories. While the near-term impact of the COVID-19 pandemic on consumer demand and sales volume is likely to be material, we believe we have sufficient liquidity to manage through the uncertainty, and we remain confident in the long-term outlook for our customers and the continued growth of the global category.”

Outlook

The Company has withdrawn its financial outlook for fiscal year 2020 for net sales growth and for Adjusted EBITDA including unconsolidated joint ventures(1). At this time, the Company does not believe it can reasonably forecast frozen potato product demand in the near term due to the unpredictable near-term effect of the COVID-19 pandemic on the global economy, and more specifically, on restaurant traffic in North America and key international markets, including markets served by the Company’s joint ventures.

The Company’s previous outlook included the contribution of a 53rd week in the fiscal 2020 period, with the additional week falling in the fourth quarter.

The Company continues to expect for fiscal 2020:

• Interest expense of approximately $110 million;
• An effective tax rate(2) excluding comparability items of approximately 24 percent; and
• Depreciation and amortization of approximately $175 million.

In addition, the Company reduced its target for capital expenditures to approximately $200 million from approximately $300 million as the Company plans to defer certain capital expenditures.

For earnings history and earnings-related data on Lamb Weston (LW) click here.

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