EAGLE, Idaho - Lamb Weston Holdings, Inc. (NYSE:LW) reported a significant decline in its third-quarter fiscal 2024 earnings, missing analyst expectations. The company's adjusted earnings per share (EPS) came in at $1.20, falling short of the $1.45 consensus. Revenue also came in below estimates at $1.46 billion, compared to the anticipated $1.65 billion.
The company's stock fell sharply by 15.64% following the earnings release, indicating a negative market response to the financial results and future outlook. The earnings and revenue miss, coupled with weaker-than-expected guidance for fiscal year 2024, drove the stock's decline.
Lamb Weston's updated guidance for FY2024 includes an EPS range of $5.50 to $5.65, which is below the analyst consensus of $6.00. Revenue expectations were also adjusted to a range of $6.54 billion to $6.60 billion, compared to the consensus estimate of $6.882 billion.
Tom Werner, President and CEO, commented on the quarter's performance, attributing the financial shortfall to the transition to a new enterprise resource planning (ERP) system in North America, which had a greater impact than anticipated. "The ERP transition temporarily reduced the visibility of finished goods inventories located at distribution centers, which affected our ability to fill customer orders," Werner explained. He also noted that the company has made adjustments to the system and believes the impact is now behind them.
Despite the challenges faced in the third quarter, Werner remains confident in the long-term prospects of the business and the health of the global frozen potato category.
Year-over-year, Lamb Weston's net sales increased by 16%, which includes $357 million of incremental sales attributable to the LW EMEA Acquisition. However, income from operations declined by 16% to $224 million, and net income saw a 17% decrease to $146 million. Adjusted income from operations slightly declined from $269 million to $263 million, and adjusted EBITDA decreased from $352 million to $344 million.
The earnings report and subsequent stock movement reflect investor concerns over the company's near-term performance and outlook. Lamb Weston's management is focused on resolving the operational issues that have affected recent results and is aiming for a return to sustainable, profitable growth.
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