It has been about a month since the last earnings report for Lamb Weston (LW). Shares have added about 10.7% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Lamb Weston due for a pullback? Well, first let's take a quick look at the most recent earnings report in order to get a better handle on the recent catalysts for Lamb Weston before we dive into how investors and analysts have reacted as of late.
Lamb Weston’s Q3 Earnings Beat Estimates, Sales Rise 3% Y/Y
Lamb Weston reported solid third-quarter fiscal 2026 results, wherein both top and bottom lines beat the Zacks Consensus Estimate. While net sales increased, earnings decreased from the year-ago period’s actuals.
LW’s adjusted earnings were 72 cents, down 37% year over year, due to reduced adjusted gross profit and elevated adjusted selling, general and administrative (SG&A), partially offset by reduced income tax expense. However, the bottom line beats the Zacks Consensus Estimate of 61 cents.
Net sales amounted to $1,564.8 million, beating the Zacks Consensus Estimate of $1,485 million. The top line increased $44.3 million or 3% year over year.
On a constant-currency basis, sales were flat, as solid 7% volume growth was outweighed by a 7% drop in price/mix. Volume growth was driven by North America customer wins, share gains and retention. The decrease in price/mix reflects continued customer support through pricing and trade actions, as well as a shift in consumer demand toward value-oriented channels and brands. This includes increased sales to chain customers, which typically carry lower pricing.
Adjusted gross profit fell $92.9 million from the prior year, landing at $327.5 million, with weaker price/mix serving as the main drag and a $32.5 million pre-tax charge related to the write-off of excess raw potatoes in the International segment, due to lower-than-expected sales volumes amid weak market demand.
Adjusted SG&A expenses rose by $9.4 million year over year to $157.4 million. Although ongoing cost savings initiatives delivered benefits, these were more than offset by normalized performance-based compensation and benefit accruals, as well as $12.7 million in write-offs of capitalized costs related to discontinued projects.
Adjusted EBITDA decreased $101.3 million year over year, reaching $271.7 million. This decline was due to reduced adjusted gross profit and elevated adjusted SG&A.
Lamb Weston Provides Q3 Insights by Segment
Net sales for the North America segment, which covers customers in the United States, Canada and Mexico, increased 5% to $1,035 million compared with the prior-year quarter. Volume rose 12%, driven by customer contract wins, share gains and continued growth. The segment’s price/mix declined 7%, reflecting ongoing price and trade support for customers, along with an unfavorable mix shift toward faster-growing chain customers and private-label products, which typically carry lower pricing.
The North America segment adjusted EBITDA declined by $12.8 million to $289.8 million. Higher volumes, reduced manufacturing costs per pound and lower adjusted SG&A, supported by cost savings initiatives and improved operating efficiencies, were more than offset by continued price and trade support and unfavorable mix.
Net sales for the International segment, which includes all customers outside North America, declined 1% to $529.8 million, including a favorable $43.7 million impact from foreign currency. On a constant currency basis, net sales decreased 9%. Volume declined 2%, reflecting softer demand in key international markets. The segment’s price/mix declined 7% at constant currency, primarily due to continued pricing and trade actions to support customers, along with an unfavorable mix toward lower-priced geographies and products.
International segment adjusted EBITDA fell by $75.6 million year over year to $18.5 million. The decline was mainly caused by reduced sales and higher manufacturing costs per pound, including a $32.5 million pre-tax charge related to the write-off of excess raw potatoes and increased fixed factory burden from underutilized international production facilities. These elevated costs were partially offset by benefits from cost savings initiatives.
Lamb Weston’s Financial Health Snapshot
The company ended the quarter with cash and cash equivalents of $57.5 million, long-term debt and financing obligations (excluding the current portion) of $3,642.9 million and total shareholders’ equity of $1,827.1 million. Lamb Weston generated $595.6 million as net cash from operating activities for the 39 weeks ending Feb. 22, 2026, wherein capital expenditures amounted to $256.5 million. In the third quarter of fiscal 2026, Lamb Weston returned $51.4 million to its shareholders through cash dividends. On March 31, management declared a quarterly dividend of 38 cents per share, payable on June 5, to its shareholders of record as of May 8, 2026.
What to Expect From Lamb Weston in FY26?
The company now expects net sales in the range of $6.45 billion to $6.55 billion, compared with its prior outlook of $6.35 billion to $6.55 billion. Adjusted EBITDA is projected between $1.08 billion and $1.14 billion, narrowed from the previous range of $1 billion to $1.20 billion. Capital expenditures are now anticipated to be approximately $400 million, down from the earlier outlook of around $500 million.
How Have Estimates Been Moving Since Then?
Since the earnings release, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted -6.09% due to these changes.
VGM Scores
At this time, Lamb Weston has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Interestingly, Lamb Weston has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Lamb Weston belongs to the Zacks Food - Miscellaneous industry. Another stock from the same industry, McCormick (MKC), has gained 4.1% over the past month. More than a month has passed since the company reported results for the quarter ended February 2026.
McCormick reported revenues of $1.87 billion in the last reported quarter, representing a year-over-year change of +16.7%. EPS of $0.66 for the same period compares with $0.60 a year ago.
McCormick is expected to post earnings of $0.71 per share for the current quarter, representing a year-over-year change of +2.9%. Over the last 30 days, the Zacks Consensus Estimate has changed -0.6%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for McCormick. Also, the stock has a VGM Score of D.
Beyond Nvidia: AI's Second Wave Is Here
The AI revolution has already minted millionaires. But the stocks everyone knows about aren't likely to keep delivering the biggest profits. Little-known AI firms tackling the world's biggest problems may be more lucrative in the coming months and years.
See Stocks Now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Lamb Weston (LW): Free Stock Analysis Report
McCormick & Company, Incorporated (MKC): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).