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LW

Lamb Weston Holdings, Inc. (LW)·Q4 2025 Earnings Summary

Executive Summary

  • Q4 2025 revenue of $1.676B grew 4% YoY; Adjusted EPS was $0.87; Adjusted EBITDA was $284.9M . Against S&P Global consensus, LW delivered a broad beat: EPS $0.87 vs $0.63*, revenue $1.676B vs $1.589B*, and Adjusted EBITDA $284.9M vs ~$253.5M*.
  • Mix/pricing declined 4% as LW partnered with customers to compete in a soft restaurant traffic backdrop; volume rose 8% on contract wins across channels and geographies .
  • FY26 guidance introduced: net sales $6.35–$6.55B, Adjusted EBITDA $1.0–$1.2B, capex ~$500M; plus “Focus to Win” cost savings plan targeting ≥$250M run-rate savings by FY28 and ~$120M working capital improvements by FY27 .
  • Liquidity and cash flow improved: inventory days down eight, cash from operations $868.3M in FY25; dividend raised to $0.37/share with $358M remaining under repurchase authorization .
  • Catalyst: renewed discipline (pricing/trade), cost actions, and improved working capital underpin FY26 guidance clarity while soft traffic and competitive intensity remain key watch items .

What Went Well and What Went Wrong

What Went Well

  • Volume strength and customer wins: “Volume was up with wins across channels and geographies, and net sales grew” . Q4 volume +8%; International net sales +15% YoY .
  • Working capital and cash generation: Inventory days down eight; operating cash flow $868.3M FY25 . “We made significant progress in improving working capital” .
  • Strategic cost program: Announced “Focus to Win” with ≥$250M run-rate savings by FY28 and ~$120M working capital improvements by FY27; board comp aligned to equity . “We are operating with a heightened sense of urgency to return Lamb Weston to profitable growth” .

What Went Wrong

  • Pricing/mix pressure: Price/mix −4% overall in Q4; North America −5% due to planned pricing/trade; International −1% amid competitive environment .
  • Gross profit compression and factory absorption: Gross profit down $45.6M YoY; higher fixed factory absorption from curtailed production and low-single-digit input cost inflation offset lower potato costs .
  • Restaurant traffic headwind: Soft traffic in U.S. and UK (low single-digit declines); equity method earnings fell (Q4 loss of $0.3M vs $8.2M prior) .

Financial Results

Consolidated performance vs prior year and prior quarter

MetricQ4 2024Q3 2025Q4 2025
Revenue ($USD Billions)$1.612 $1.520*$1.676
Gross Profit ($USD Millions)$387.9 —$342.3
Gross Margin (%)24.1% —20.4%
Net Income ($USD Millions)$129.6 —$119.9
Diluted EPS (GAAP) ($)$0.89 $1.03*$0.85
Adjusted Diluted EPS ($)$0.78 —$0.87
Adjusted EBITDA ($USD Millions)$283.4 $364 $284.9
Effective Tax Rate (%)28.2% —15.1%

Note: Values marked with * retrieved from S&P Global.

Q4 2025 Actual vs S&P Global Consensus

MetricConsensusActual (Q4 2025)Surprise
Revenue ($USD Billions)$1.589*$1.676 +$0.087B
EPS (Primary) ($)$0.63*$0.87 +$0.24
EBITDA ($USD Millions)$253.5*$284.9 +$31.4M

Note: Values marked with * retrieved from S&P Global.

Segment breakdown (Q4 2025)

SegmentNet Sales ($USD Millions)YoY %Price/Mix %Volume %Segment Adjusted EBITDA ($USD Millions)
North America$1,103.1 −1% −5% +4% $257.9
International$572.7 +15% −1% +16% $62.6
Total$1,675.8 +4% −4% +8% —

KPIs

KPIQ4 2025FY 2025
Effective Tax Rate (%)15.1% 28.6%
Cash from Operations ($USD Millions)—$868.3
Capex ($USD Millions)—$650.7
Inventory Days Change—−8 days
Dividend per Share ($)$0.37 (declared July 15, payable Aug 29) $1.46
Share Repurchases ($USD Millions)—$282.0; 4.867M shares @ $57.94 avg
Revolver Availability ($USD Millions)—$1,166.8

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net SalesFY 2026—$6.35B–$6.55B New
Adjusted EBITDAFY 2026—$1.0B–$1.2B New
CapexFY 2026~$550M ~$500M Lowered
Effective Tax RateFY 2026—~26% (H1 high-20s, H2 low-20s) New
Adjusted Metrics DefinitionFY 2026Shared excludes unrealized derivatives/FX/blue-chip gains Now also excludes non-cash share-based comp Methodology change
Dividend per ShareQ4 2025$0.36 (Q4 2024) $0.37 (declared) Raised
Share Repurchase Authorization RemainingQ3 2025~$458M ~$358M Decreased (buybacks)

Earnings Call Themes & Trends

TopicQ2 2025 (Dec)Q3 2025 (Apr)Q4 2025 (Jul)Trend
Supply/Demand & CapacityIndustry adding 8.6B lbs capacity; utilization mid/high-80s; normalized EBITDA 19–20% Some projects delayed; curtailments improve utilization; inventory targeted ~65 days Further notes on cancellations/delays; LW positioned for premium segments Stabilizing capacity outlook; competitive intensity persists
Pricing/MixCompetitive pressure, price/mix down; top-line re-guided lower Price investments continue; North America −4% mix; International −7% (cc −4%) Q4 price/mix −4%; North America −5%; International −1% Improving mix via small/regional/retail channels
Restaurant Traffic & ConsumerUS/Intl traffic soft; fry attachment steady; burger chain traffic down QSR hamburger traffic down; two-year stack mid/high single-digit declines U.S./UK low single-digit declines; fry attachment ~2 pts above pre-pandemic Weak but stabilizing; attachment supportive
Working Capital & InventoryElevated inventories; actions to reduce Continued reductions; target ~65 days at year-end Inventory days down eight; plan ~$120M working capital improvements by FY27 Improving trajectory
Tariffs/MacroNot included in outlook; potential retaliatory risk Monitoring; no explicit impact included Potential ~$20M exposure if Aug 1 tariffs enacted; mitigations via blends Manageable headwind
Innovation & R&DBroader TAM in non-traditional fry channels Fridge-friendly fries/tots; international 3-sided frenzy fries “Fast Fries” process innovation; global innovation hubs Expanding ambition
Reporting & IncentivesDiscussed restructuring plan; capital intensity reduction Cost savings pipeline with advisors Adjusted metrics to exclude stock comp; board comp in equity; FCF & ROIC in plans Greater FCF/ROIC orientation

Management Commentary

  • “Lamb Weston returned to growth in the second half of the year with momentum in customer wins and retention, delivering financial results above our updated expectations” — Mike Smith, CEO .
  • “We are announcing further steps to deliver at least $250 million of savings, including $200 million in annualized run rate savings and $120 million of favorable working capital improvements by year-end fiscal 2027” — Mike Smith .
  • “Our adjusted EBITDA increased in the quarter… and we made significant progress in improving working capital for the full year” — Mike Smith .
  • “We expect revenue for fiscal 2026 in the range of $6.35 billion to $6.55 billion… Adjusted EBITDA of $1 billion to $1.2 billion” — Bernadette Madarieta, CFO .
  • “We are implementing changes… to fully exclude non-cash share-based compensation expense [from adjusted metrics]” — CFO .

Q&A Highlights

  • EBITDA margin outlook: Analysts probed if ~17% implies a floor; management expects margins below normalized FY26, with path back as cost savings and demand recover: “we believe our strategy has us on a path to return to those margin levels” — CEO .
  • Tariffs scenario analysis: Potential ~$20M financial exposure if Aug 1 tariffs implemented; mitigations via ingredient blends; most supply local/regional .
  • Sales cadence and 53rd week: H1 pressured from carryover pricing; volume uplift mostly in 53rd week in H2; price actions lighter in H2 .
  • Capacity landscape: ~1–1.5B lbs of projects canceled/delayed (outside North America); LW focusing on premium capabilities and advantaged sourcing .
  • Working capital plan: Continued inventory improvements with integrated planning from agriculture through finished goods .

Estimates Context

  • Q4 2025 delivered a clean beat vs S&P Global consensus: EPS $0.87 vs $0.63*, revenue $1.676B vs $1.589B*, Adjusted EBITDA $284.9M vs ~$253.5M*. Near-term (Q1–Q3 FY26) consensus implies stabilizing top-line and EPS progression (EPS: $0.53, $0.63, $0.85; revenue: $1.616B, $1.591B, $1.503B; EBITDA: $254M, $273M, $311M)*.
  • Estimate revisions likely to reflect: pricing/trade pacing, cost savings phasing (2/3 realized in H2 FY26), potato cost benefits starting Q2 FY26, and Argentina startup ramp .

Note: Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

  • Broad beat driven by volume wins and disciplined cost control despite pricing/mix headwinds; watch sustainability of International momentum and North America mix improvements .
  • FY26 guide is conservative on traffic and pricing, with H2 weighted benefits (53rd week, cost savings phasing, lower potato costs), suggesting a back-half earnings bias .
  • “Focus to Win” (≥$250M savings) and lower capex (~$500M) pivot LW toward cash generation and returns; board/management incentives realigned to FCF/ROIC .
  • Traffic remains the swing factor: fry attachment rates are supportive, but U.S./UK traffic softness and competitive intensity keep near-term risk balanced .
  • Tariff risk quantified (~$20M) and partially mitigated; monitor policy developments and FX/commodity volatility .
  • Shareholder returns continue (dividend $0.37; $358M buyback capacity); liquidity ample ($1.17B revolver) .
  • Actionable: Favor H2 FY26 set-ups; monitor segment mix, price/mix trajectory, and early crop/potato cost timing in Q2 update .

Additional Q4 2025 Relevant Releases

  • Dividend declaration: $0.37/share, payable Aug 29, 2025 .
  • Governance refresh: LW to appoint six new independent directors (June 30, 2025) .
  • Sustainability: New global sustainability report issued (June 11, 2025) .
  • Leadership: New CIO appointment (May 7, 2025) .