On October 6, Lamb Weston Holdings, Inc. (NYSE:LW) reported better-than-expected results for Q1 of fiscal 2027 and lifted its full-year outlook for net sales, adjusted EPS, and adjusted EBITDA. Earlier this year, the stock ranked sixth on our list of the 10 High Growth Stocks Insiders Are Buying. Investors looking for high-growth opportunities backed by insider buying may want to see which stocks ranked ahead of LW.
The company reported net sales of $1.67 billion, up 1% year-over-year and above analysts’ expectations of $1.66 billion. Adjusted EPS came in at $0.75, beating market expectations of $0.59. However, despite stronger sales and EPS, the company continued to face pressure on its overall profitability.
Lamb Weston Holdings, Inc. raised its fiscal 2027 adjusted EPS guidance from its previous range of $2.95 to $3.25 to $3.05 to $3.35. The company also lifted its full-year adjusted EBITDA outlook to $1.125 billion to $1.215 billion and now expects net sales to grow by a low-single-digit percentage, compared with its previous outlook of 0%–1% growth. The updated outlook suggests that management expects improving demand and cost-saving measures to support performance over the rest of the fiscal year.
Improving North American Demand Supports the Outlook
North American demand showed signs of improvement during the quarter as sales volume rose 7% to mark the seventh consecutive quarter of volume growth. This shows that the company’s commercial strategy is gaining traction.
The company is also making progress with its cost-saving initiatives. Capacity optimization increased North American manufacturing utilization by 10 percentage points to help the company improve efficiency and generate savings. Further improvements and cost savings could provide additional earnings upside.
The turnaround could have further room to run. Management plans to outline its longer-term strategy at an investor day in early 2027, where it may provide more insight into future operational improvements and cost-saving opportunities.
Profitability Remains a Key Challenge
Despite higher sales volume, Lamb Weston Holdings, Inc.’s overall profitability remains under pressure. Adjusted EBITDA declined 5% year-over-year to $286 million, as lower price/product mix and higher manufacturing and operating costs offset the benefits of increased volume.
Reported net income also declined sharply to $29 million from $64 million a year earlier. Although adjusted EPS slightly improved, the decline in reported earnings highlights that Lamb Weston Holdings, Inc. still faces meaningful challenges. Another food company facing similar challenges is General Mills (GIS), but why does Wall Street remain skeptical of its turnaround despite signs of improvement?
International operations remain weak as Lamb Weston Holdings, Inc.’s international sales fell 8%. Segment adjusted EBITDA dropped 54% to $27 million, reflecting weaker volumes, higher manufacturing costs, and underutilized factories. Continued weakness in international markets could limit the benefits of improving North American demand and make it difficult for the company to achieve sustained growth in overall profitability.
Lamb Weston Holdings, Inc. appears to be depending heavily on cost savings and operational efficiencies. However, if the savings fall short of expectations or become harder to achieve, stronger sales volumes may not translate into the earnings growth investors are looking for.
What the Numbers Say
Hedge fund interest in the stock declined during the second quarter. According to Insider Monkey’s database, 35 hedge funds held Lamb Weston Holdings, Inc. at the end of the second quarter, down from 43 in the first quarter.
The stock also rose sharply following the company’s results and improved guidance and investors buying after the rally risk paying for expected improvements that may already be reflected in the share price.
At 14.66 times forward earnings, Lamb Weston Holdings, Inc. appears reasonably valued relative to its improving earnings outlook. Investors evaluating food stocks on valuation may want to see what the market could be overlooking in Kraft Heinz (KHC). LW’s valuation thesis rests on continued North American volume growth, operational cost savings, and the prospect of stronger earnings. However, the multiple alone does not guarantee further gains, especially when adjusted EBITDA is declining and international operations remain weak. Further upside may depend on the company delivering stronger profitability.
For investors, the key question is whether North American volume growth and cost savings can turn into sustained company-wide earnings and margin growth, instead of just offsetting continued weakness elsewhere.
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