Frozen Potato & Fries Company Lamb Weston's Q3 Highlights: 31% Topline Growth, Earnings Beat, Inflationary Pressures & More

Lamb Weston Holdings Inc LW reported third-quarter FY23 sales growth of 31% year-on-year to $1.25 billion, beating the consensus of $1.16 billion.
Overall volume was flat as solid growth in shipments to large chain restaurant and retail channel customers in North America offset the impact of exiting certain lower-priced and lower-margin business.
Net sales from the Global segment rose 33% Y/Y, Foodservice increased 22%, and Retail segment climbed 50%.
Gross profit increased 80% Y/Y to $397.8 million, and the gross margin expanded 860 basis points to 31.7%.
The operating margin was 21.2%, and operating income for the quarter jumped 99% to $266.3 million.
Adjusted EBITDA, including unconsolidated joint ventures, increased 72% Y/Y to $346 million.
Adjusted EPS of $1.43 beat the analyst consensus of $0.99.
Lamb Weston held $675 million in cash and equivalents as of Feb. 26, 2023. Net cash from operating activities for nine months totaled $335.1 million.
In Q3, the company returned $35.2 million to shareholders through cash dividends and $12.2 million through share repurchases.
Tom Werner, President and CEO, said "Our performance was broad-based, with strong sales and earnings growth across each of our core business segments that were in line with or exceeded our projections for the quarter. We expect this momentum will continue through this fiscal year and provide a solid foundation for fiscal 2024. However, we continue to believe that the near-term macroenvironment in North America and Europe will remain volatile as we face higher costs for raw potatoes and other key inputs, and as consumer demand and restaurant traffic continue to be affected by inflationary pressures."
Outlook: Lamb Weston updated its financial targets for fiscal 2023 to include the consolidation of LW EMEA.
LW raised the FY23 Adjusted EPS forecast to $4.35 - $4.50 from $3.75 - $4.00 versus the consensus of $3.92.
It raised the FY23 sales outlook to $5.25 billion - $5.35 billion from $4.8 billion - $4.9 billion, against the consensus of $5.02 billion.
Price Action: LW shares are trading higher by 4.52% at $108.88 on the last check Thursday.

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