Why Lamb Weston (LW) Stock Is Nosediving
What Happened:
Shares of potato products company Lamb Weston (NYSE:LW) fell 27.8% in the afternoon session after the company reported second-quarter earnings results: Its revenue and EPS missed while its full-year earnings forecast fell short of Wall Street's estimates. Management summarized the drivers of the weakness: "Our price/mix results were below our expectations, while market share losses and a slowdown in restaurant traffic in the U.S. and many of our key international markets were greater than we expected. We also incurred losses related to a voluntary product withdrawal." Overall, this was a bad quarter for Lamb Weston.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Lamb Weston? Access our full analysis report here, it's free.
What is the market telling us:
Lamb Weston's shares are not very volatile than the market average and over the last year have had only 4 moves greater than 5%. Moves this big are very rare for Lamb Weston and that is indicating to us that this news had a significant impact on the market's perception of the business.
The biggest move we wrote about over the last year was 4 months ago, when the stock dropped 16.1% on the news that the company reported first-quarter results with revenue and EPS falling below analysts' estimates as the business transition to a new enterprise resource planning system (ERP) significantly disrupted its operations. According to management, the "ERP transition temporarily reduced the visibility of finished goods inventories located at distribution centers, which affected our ability to fill customer orders. In turn, this pressured sales volume and margin performance". Lamb Weston also noted soft demand for restaurants in general and lowered its full-year revenue and EPS guidance, missing Wall Street's estimates. Overall, this was a bad quarter for Lamb Weston.
Lamb Weston is down 47.2% since the beginning of the year, and at $56.24 per share it is trading 50.1% below its 52-week high of $112.69 from July 2023. Investors who bought $1,000 worth of Lamb Weston's shares 5 years ago would now be looking at an investment worth $886.44.
When a company has more cash than it knows what to do with, buying back its own shares can make a lot of sense–as long as the price is right. Luckily, we’ve found one, a low-priced stock that is gushing free cash flow AND buying back shares. Click here to claim your Special Free Report on a fallen angel growth story that is already recovering from a setback.