By Lamb Weston Holdings Inc. delivered a robust fiscal fourth quarter for 2025, exceeding analyst expectations on both earnings and revenue.
The potato products company reported earnings per share (EPS) of $0.87, marking a 35.94% upside surprise compared to consensus estimates of $0.64.
Revenue for the quarter totaled $1.68 billion, surpassing forecasts of $1.59 billion and reflecting a year-over-year growth of 4%.
Following the earnings release, Lamb Weston shares surged 21% to $59.50, signaling renewed investor confidence.
Analysts credited the strong results to volume growth of 8% across multiple geographies and channels, bolstered by the company’s focus on innovation and expansion into non-traditional fry markets.
Despite ongoing challenges in restaurant traffic, particularly in the US and the UK, the company capitalized on sustained global demand for frozen potato products.
Financial health and market performance
The company’s adjusted EBITDA for the quarter was reported at $285 million, flat compared to the previous year, but exceeding analyst expectations of $253.3 million by 12.5%.
While operating margins declined to 11.1% from 13.2% in the same quarter last year, Lamb Weston’s free cash flow margin increased to 17.6%, up from 9.3%.
Cash from operations also rose, reaching $860 million, an increase of $70 million year-over-year.
Analysts’ price targets range from $55 to $82, indicating potential upside from the current market valuation.
Prior to today’s surge, Lamb Weston had a forgettable year, with the stock falling 15% in the year.
Outlook and strategic positioning
Looking ahead to fiscal 2026, Lamb Weston projects revenue between $6.35 billion and $6.55 billion, with adjusted EBITDA guidance of $1.0 billion to $1.2 billion.
However, this EBITDA midpoint of $1.1 billion falls short of analyst expectations of $1.23 billion.
The company anticipates stronger sales momentum in the second half of the fiscal year and targets an effective tax rate of around 26%.
Strategically, the company is pursuing a $250 million cost savings initiative through fiscal 2028 and continues to explore mergers, acquisitions, and joint ventures to expand its market share.
CEO Mike Smith emphasized the company’s strong market position, stating, “We are operating in a really attractive category.”
CFO Bernadette Madrieta added that the company aims to “lean into those premium segments of the market.”
While Lamb Weston continues to execute on its strategic priorities, it faces certain risks, including potential tariff exposure estimated at $25 million, supply chain disruptions, and economic uncertainties in emerging markets.
However, the company maintained that it sees no material impact from the rise of GLP-1 weight loss drugs and reaffirmed its leverage target of 3.5 to 4 times.
Lamb Weston’s strong finish to the fiscal year, combined with investor enthusiasm and ongoing strategic initiatives, places the company in a favorable position as it enters FY2026.
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