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LW

Lamb Weston Holdings, Inc. (LW)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 FY2025 delivered a clean beat against Wall Street: net sales rose 4% to $1.5205B, Adjusted Diluted EPS was $1.10, and Adjusted EBITDA increased 6% to $363.8M; consensus had expected ~$1.49B revenue, $0.87 EPS, and ~$300M EBITDA, making the results a broad-based beat . Consensus values marked with * are from S&P Global.
  • Management reaffirmed FY2025 guidance (net sales $6.35–$6.45B; Adjusted EBITDA $1.17–$1.21B; Adjusted EPS $3.05–$3.20) and lowered Adjusted SG&A to $665–$675M from $680–$690M, signaling cost discipline amid softer traffic .
  • Volume recovered (+9%) as ERP-related customer losses were replaced and new contracts won, but price/mix fell (−5%) due to planned price investments in a competitive market and soft global restaurant traffic (QSR burger down ~6% in February) .
  • Strategic actions: ongoing Restructuring Plan execution, AlixPartners engaged to drive near-/long-term value creation, $100M buyback in Q3, and $0.37 dividend declared; Board increased buyback authorization to $750M (remaining ~$458M) .
  • Tariff update: new U.S. import tariffs exempt USMCA-compliant Canadian plant; management does not expect a significant FY2025 impact, but notes risk of retaliatory tariffs on U.S. exports (mid- to high-teens percent of volume) .

What Went Well and What Went Wrong

What Went Well

  • Volume strength and share gains: Company fully replaced prior ERP-related regional/small/retail losses; Q3 volume +9% YoY with contract wins across channels/geographies .
  • Cost discipline and EBITDA: Adjusted EBITDA rose 6% YoY to $363.8M on higher sales volumes and lower Adjusted SG&A; SG&A benefited from restructuring and lower ERP-transition costs .
  • Strategic initiatives: AlixPartners retained to accelerate value creation; Restructuring Plan on track to deliver at least $55M pretax savings in FY2025 and $85M in FY2026 .

What Went Wrong

  • Price/mix down and competitive pressure: Price/mix fell 5% overall (NA −4%, International −7%) due to price investments and international pricing actions amidst competition and FX headwinds .
  • International profitability: International Segment Adjusted EBITDA declined to $93.2M (−8% YoY) on unfavorable price/mix despite volume gains .
  • Higher depreciation and absorption headwinds: Incremental ~$16M depreciation tied to capacity expansions and higher factory burden absorption from curtailed lines pressured margins, with a sequential gross margin step-down expected in Q4 .

Financial Results

Headline metrics – sequential trend (oldest → newest)

MetricQ1 2025Q2 2025Q3 2025
Net Sales ($USD Millions)$1,654.1 $1,600.9 $1,520.5
Diluted EPS (GAAP) ($)$0.88 $(0.25) $1.03
Adjusted Diluted EPS ($)$0.73 $0.66 $1.10
Adjusted EBITDA ($USD Millions)$289.9 $281.9 $363.8

Year-over-year quarterly comparison

MetricQ3 2024Q3 2025
Net Sales ($USD Millions)$1,458.3 $1,520.5
Diluted EPS (GAAP) ($)$1.01 $1.03
Adjusted Diluted EPS ($)$1.20 $1.10
Adjusted EBITDA ($USD Millions)$343.6 $363.8

Consensus vs Actual – Q3 2025

MetricConsensusActual
Revenue ($USD)$1,492,674,350*$1,520,500,000
Primary EPS ($)$0.868* (10 est.)$1.10 (Adjusted Diluted EPS)
EBITDA ($USD)$300,006,870*$363,800,000

Values marked with * retrieved from S&P Global.

Segment breakdown – quarterly

Segment MetricQ1 2025Q2 2025Q3 2025
North America Net Sales ($USD Millions)$1,103.7 $1,072.1 $986.3
International Net Sales ($USD Millions)$550.4 $528.8 $534.2
North America Segment Adjusted EBITDA ($USD Millions)$276.1 $266.7 $300.7
International Segment Adjusted EBITDA ($USD Millions)$50.5 $47.4 $93.2

KPIs – price/mix and volume (quarterly)

KPIQ1 2025Q2 2025Q3 2025
North America Price/Mix+1% −3% −4%
North America Volume−4% −5% +8%
International Price/Mix+5% ~0% −7% (−4% cc)
International Volume−1% −6% +12%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net SalesFY2025$6.35B–$6.45B $6.35B–$6.45B Maintained
Adjusted EBITDAFY2025$1.17B–$1.21B $1.17B–$1.21B Maintained
Adjusted Net IncomeFY2025$440M–$460M $440M–$460M Maintained
Adjusted Diluted EPSFY2025$3.05–$3.20 $3.05–$3.20 Maintained
Adjusted SG&AFY2025$680M–$690M $665M–$675M Lowered
Depreciation & AmortizationFY2025~$375M ~$375M Maintained
Effective Tax RateFY2025~28% ~28% Maintained
Capital ExpendituresFY2025~$750M ~$750M (timing may push to FY2026 for Argentina) Maintained
Dividend per ShareQ3 FY2025$0.37 declared $0.37 payable May 30, 2025 Maintained
Share Repurchase AuthorizationOngoingIncreased to $750M; ~$558M remaining (Dec-2024) Authorization $750M; ~$458M remaining (Q3) Utilized $100M

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
Supply chain & ERPRestructuring plan incl. Connell closure, line curtailments; ERP phase deferred; higher manufacturing costs and absorption pressures Cost actions ongoing; additional absorption headwind in Q4; inventory reduction priority; exiting surplus warehouse space Continued execution; near-term margin headwinds
Tariffs/macroSofter traffic globally; added industry capacity and competitive pricing; EBITDA margin normalized 19–20% near term New U.S. import tariffs; Canadian plant exempt; minimal expected FY2025 impact; risk of retaliatory tariffs on U.S. exports Macro/tariff risks monitored
Product & customer winsInternational customer wins; volume benefits expected Q3/Q4 NA QSR burger traffic down ~6% in Feb; new large QSR converting to frozen fries; private label retail launches; innovative “fridge friendly” fries/tots; “3-sided frenzy fries” internationally Pipeline building; innovation supports share
Potato crop & contractsNA 2024 potato price −3%; Europe crop in line; future capex pivot to maintenance/environmental 2025 NA crop contracting: mid-single digit price decline; Europe fixed-price contracts ~flat; fewer acres given demand/inventory Input cost relief in NA; Europe stable
Governance/activismCEO transition to Mike Smith; buyback increase; dividend raised Engagement with shareholders (JANA, Continental Grain); activism advisory fees noted Active engagement; cost recognized

Management Commentary

  • “We are amplifying our efforts with customers… engaged AlixPartners… to accelerate an end-to-end value creation plan… over 30 projects underway this fiscal year… quick wins as part of a savings pipeline across multiple years.” – Mike Smith, CEO .
  • “Net sales increased 4%… Volume increased 9%… Price/mix declined 5% due to planned investments in price to compete.” – Q3 press release commentary .
  • “Adjusted EBITDA increased $20M… driven by higher sales volumes and lower Adjusted SG&A… partially offset by lower Adjusted Gross Profit and ~$16M incremental depreciation.” – CFO .
  • “We continue to expect adjusted EBITDA in the range of $1.17B to $1.21B… adjusted SG&A now $665M–$675M.” – CFO guidance .
  • “As it relates to U.S. imports of frozen french fries, a new universal baseline tariff of 10%… USMCA compliant imports from Canada are exempt… we do not currently expect [tariffs] to have a significant impact on FY2025.” – CFO .

Q&A Highlights

  • Contracting and costs: NA potato costs expected mid-single digit decline; only ~1/3 of COGS is raw potatoes, with inflationary pressures in oils, packaging, and fixed overhead also relevant .
  • Q4 margin step-down: ~700 bps expected sequential decline in adjusted gross margin driven by seasonality (~260 bps) and higher absorption from curtailed lines (~330 bps), plus other inputs (~100 bps) .
  • Inventory normalization: Targeting ~65 days inventory by year-end; curtailments used to work down finished goods; data-driven approach to SKU mix .
  • International competitiveness: Pricing pressure and share losses in APAC/Middle East; EMEA pricing moderated as potato crop improved; gradual win-back ongoing .
  • Capacity outlook: Some competitor capacity announcements delayed; LW utilization in low 90% after footprint adjustments; modernized assets expected to support long-term rebound .

Estimates Context

  • Q3 FY2025 beats: Revenue $1.5205B vs ~$1.4927B*; EPS $1.10 (Adjusted Diluted) vs ~$0.87*; EBITDA $363.8M vs ~$300.0M* — broad-based outperformance. Values marked with * retrieved from S&P Global .
  • Estimate implications: Street models likely need to reflect ongoing price investment (low-to-mid single digit price/mix declines), Q4 gross margin step-down, and lowered SG&A guidance ($665M–$675M) — with FY guide reaffirmed, but mix/absorption risks persisting into early FY2026 .

Key Takeaways for Investors

  • Q3 execution reset the narrative: volume recovery and disciplined costs drove beats on revenue, EPS, and EBITDA; FY guide reaffirmed despite macro softness .
  • Near-term margin pressure persists: Q4 sequential gross margin step-down (~700 bps) from seasonality and absorption of curtailed lines; expect improved absorption as inventories normalize .
  • Price/mix remains a headwind: planned price investments in NA and competitive pricing internationally (with FX headwinds) temper margin expansion; watch contracting cycle and tariff developments .
  • Strategic catalysts: AlixPartners engagement, Restructuring Plan savings ($55M FY2025; $85M FY2026), capex pivot to maintenance/environmental; supports medium-term free cash flow inflection .
  • Capital returns: $100M repurchases in Q3; ~$458M remaining authorization; dividend maintained at $0.37 — optionality to lean into buybacks given leverage target ~3.5x and improving FCF .
  • Trading lens: Expect near-term volatility around Q4 margin trajectory and International pricing; medium-term thesis hinges on value-creation savings, demand normalization, and modernized asset base utilization .
  • Risk watchlist: Softer global traffic (notably QSR burger), competitive capacity additions ex-U.S., FX/macro, and potential retaliatory tariffs on U.S. exports (mid- to high-teens of volume) .