Lamb Weston (NYSE: LW) reported Q1 EPS of $0.20, $0.21 worse than the analyst estimate of $0.41. Revenue for the quarter came in at $984 million versus the consensus estimate of $1.01 billion.

Fiscal 2022 Outlook:

The Company continues to expect fiscal 2022 net sales growth will be above its long-term target of low-to-mid single digits. The Company continues to anticipate net sales growth in the second quarter of fiscal 2022 will be driven largely by higher volume, reflecting an ongoing recovery in demand for frozen potato products, as well as a favorable comparison to relatively soft shipments in the second quarter of fiscal 2021. The Company continues to expect net sales growth in the second half of fiscal 2022 to reflect more of a balance of higher volume and improved price/mix as recent pricing actions are fully implemented in the market.

The Company expects net income and Adjusted EBITDA including unconsolidated joint ventures will be pressured for the remainder of fiscal 2022, as it manages through significant inflation for key production inputs, packaging and transportation compared to fiscal 2021 levels, as well as industrywide operational challenges, including labor availability, and upstream and downstream supply chain disruptions, resulting from volatility in the broader supply chain as the overall economy continues to recover from the pandemic’s impact. In addition, the Company expects its potato costs on a per pound basis will likely rise as the year progresses due to the extreme summer heat that negatively affected the quality of potato crops in the Pacific Northwest. Accordingly, the Company expects gross margins to remain below pre-pandemic levels through fiscal 2022. The Company previously expected earnings to gradually approach pre-pandemic levels in the second half of fiscal 2022.

The Company continues to expect that ongoing investments in its information technology, commercial, and supply chain will increase operating expenses in the near term, but remains confident that these investments will improve its ability to support growth and margin improvement over the long term.

The Company continues to believe that its strong balance sheet and ability to generate cash has it well-positioned to expand production capacity to support long-term growth, including its previously announced investments in the U.S. and China, as well as to make strategic investments in its information technology platform, including the second phase of its ERP project. Through its joint venture in Europe, the Company also previously announced investments to expand capacity in Russia and the Netherlands.

In addition, for fiscal 2022, the Company continues to expect:

• Interest expense, net, of approximately $115 million, and
• Depreciation and amortization of approximately $190 million

The Company is reducing its estimate for its effective tax rate to approximately 22 percent. The Company previously estimated its effective tax rate would be at the low end of its long-term range of 23 percent and 24 percent.

The Company is also reducing its estimate for cash used for capital expenditures, excluding acquisitions, to approximately $450 million from its previous estimate of $650 million to $700 million, due to the projected timing of expenditures related to certain capacity expansion projects.

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