Post Earnings Coverage as Lamb Weston Sales Up 7%, Adjusted EPS Jumped 26%

Upcoming AWS Coverage on Kraft Heinz

LONDON, UK / ACCESSWIRE / January 12, 2017 / Active Wall St. announces its post-earnings coverage on Lamb Weston Holdings, Inc. (NYSE: LW). The Company reported its fiscal 2017 second quarter results on January 10, 2017. The Company’s spinoff from ConAgra Brands, Inc. (formerly ConAgra Foods, Inc.) was effective on November 09, 2016. Lamb Weston’s Q2 FY17 financial statements reflect results on a carve-out basis prior to the completion of the spin, and on a standalone basis for the balance of the quarter. Register with us now for your free membership at: http://www.activewallst.com/register/.

One of Lamb Weston’s competitors within the Food – Major Diversified space, The Kraft Heinz Co. (NASDAQ: KHC), is estimated to report earnings on February 23, 2017. AWS will be initiating a research report on Kraft Heinz following the release of its earnings results.

Today, AWS is promoting its earnings coverage on LW; touching on KHC. Get our free coverage by signing up to:

http://www.activewallst.com/registration-3/?symbol=LW

http://www.activewallst.com/registration-3/?symbol=KHC

Earnings Reviewed

For the three months ended November 27, 2016, Lamb Weston’s net sales increased 7% to $791 million versus the year-ago same period. The Company’s volume increased 4% as productivity programs and strong manufacturing plant performance stretched available capacity, allowing the Company to meet demand growth in both North America and international markets. Price/mix increased 3% in the reported quarter due to pricing actions and favorable product and customer mix. The Company’s revenue numbers were above analysts’ projection of $773.6 million.

During Q2 FY17, Lamb Weston’s income from operations advanced 15% to $126 million from $110 million in the prior year’s comparable period, and included $9 million of costs related to the spinoff from ConAgra. The increase was largely due to favorable price/mix and volume, as well as supply chain efficiencies. Raw potato costs were essentially flat versus the prior year’s corresponding period.

For Q2 FY17, Lamb Weston’s adjusted EBITDA including unconsolidated joint ventures was $168 million, an increase of 19% versus the prior year’s comparable period, mainly reflecting growth in income from operations, which was partially offset by lower equity method investment earnings.

During Q2 FY17, Lamb Weston’s diluted EPS increased 18% to $0.59 from $0.50 in the prior year’s same period, and adjusted diluted EPS was $0.63, up 26% from the year earlier same period. The increases were largely due to higher income from operations, which was partially offset by higher interest costs and lower equity method investment earnings. The Company’s diluted EPS surpassed market expectations of $0.55 per share.

Segment Results

During Q2 FY17, net sales for Lamb Weston’s Global segment increased 6% to $413 million. Volume added 5%, driven by growth in both domestic and international markets. During the reported quarter, Global Segment Product Contribution Margin increased 17% to $92 million, driven by favorable price/mix, volume growth, and supply chain efficiency savings.

For Q2 FY17, Lamb Weston’s Foodservice segment net sales advanced 11% to $251 million. Volume increased 5%, largely behind growth of small and mid-sized restaurant chain operators as well as regional and independent food distributors. For the reported quarter, Foodservice Segment Product Contribution Margin increased 39% to $80 million, driven by favorable price/mix, supply chain efficiency savings and volume growth.

Net sales for the Lamb Weston’s retail segment increased 5% to $97 million in Q2 FY17. Volume increased 4 percentage points, largely driven by growth of licensed brands and private label. Retail Segment Product Contribution Margin increased 36% to $21 million in the reported quarter, driven by favorable price/mix, the timing of advertising spending, supply chain efficiency savings and volume growth.

Balance Sheet

Lamb Weston reported that in conjunction with the spinoff, the Company took on an additional $2.4 billion of debt which includes a $675 million 5-year floating rate term loan, $833 million of 8-year senior notes with a 4 5/8% coupon, $833 million of 10-year senior notes with a 4 7/8% coupon. Additionally, Lamb Weston entered into a $500-million floating rate revolving credit facility, of which $80 million was outstanding and drawn as of November 27, 2016. The Company’s weighted average interest rate is currently slightly over 4%. In H1 FY17, Lamb Weston generated approximately $162 million of cash from operations.

Outlook

Lamb Weston announced that for FY17 it expects net sales to grow at a mid-single digit rate, up from a previous estimate of a low single digit increase, with a relatively balanced contribution from price/mix and volume. The Company is estimating adjusted EBITDA, including unconsolidated joint ventures, to grow at a mid-teens rate, up from a previous estimate of a high single digit increase; reflecting solid sales growth and savings from supply chain efficiencies, which will be partially offset by lower contribution from equity method investment earnings. The Company is estimating adjusted diluted EPS of $2.20 to $2.28 for FY17.

Stock Performance

At the closing bell, on Wednesday, January 11, 2017, Lamb Weston’s stock was marginally up 0.14%, ending the trading session at $36.89. A total volume of 2.18 million shares were traded at the end of the day. In the last month, shares of the Company have advanced 1.40%. The Company’s shares are trading at a PE ratio of 17.78 and have a dividend yield of 2.03%. The stock currently has a market cap of $5.35 billion.

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