Lamb Weston Earnings Lift Guidance, Cut Capex

Lamb Weston Holdings (LW) reported third-quarter fiscal 2026 earnings on April 1, 2026, beating adjusted EPS forecasts. The company raised its FY2026 net-sales midpoint while trimming capital spending, as North America gains offset weaker international demand.

Quarter Results and Guidance

For the quarter ended February 22, 2026, Lamb Weston reported net sales of $1.56 billion, up 3% year-over-year, with volumes rising 7%. Income from operations fell 49% to $126.6 million. Net income declined 63% to $54.0 million, and diluted earnings per share from continuing operations dropped 62% to $0.39. Adjusted EPS, however, rose to $0.72, surpassing consensus estimates of $0.63 to $0.64.

Adjusted EBITDA declined by $101 million to about $272 million, reflecting unfavorable price and product mix, a $33 million raw-potato write-off in international operations, and higher input costs including tariffs, oils, and fuel. These factors were partially offset by volume gains, cost savings, and efficiencies in North America.

Lamb Weston raised its FY2026 net-sales midpoint to a range of $6.45 billion to $6.55 billion, reflecting roughly a 1.8% foreign-exchange benefit. The company cut capital expenditures to about $400 million, a $100 million reduction from prior plans. Management also increased the adjusted EBITDA midpoint, raised expected depreciation and amortization to approximately $395 million, and noted the tax rate includes about $20 million of non-beneficial-loss impacts. The company expects fourth-quarter revenue near $1.75 billion and a seasonal gross-margin decline of 250 to 300 basis points from the third quarter’s 20.9%. President and CEO Mike Smith described the shift as "a departure from Lamb Weston's previous focus on growth and scale."

Operations, Cash Flow, and Returns

North America drove growth, with net sales rising 5% and volumes increasing 12% due to customer wins, share gains, and retention, despite a 7% decline in price and product mix. International net sales fell 1% on a reported basis and 9% on a constant-currency basis, with volumes down 2%. International segment EBITDA dropped $76 million year-over-year to $19 million.

Through the first nine months of fiscal 2026, net sales totaled $4.84 billion, up 1% year-over-year. Net income declined 24% to $180.4 million, with diluted EPS at $1.29. Operating cash flow improved by $110 million to $596 million, and free cash flow rose $417 million to $339 million.

The balance sheet showed net debt of $3.9 billion, leverage of about 3.4 times trailing adjusted EBITDA, and liquidity of $1.3 billion. The company delivered $100 million in cost savings during FY2026 and is tracking ahead of a $250 million target by FY2028. It closed the Munro, Argentina plant and consolidated Latin America production. Year-to-date capital spending was $257 million, down $307 million from a year earlier. Shareholder returns totaled $205 million year-to-date, including $155 million in dividends and $50 million in share repurchases. After the quarter, the company repurchased $43 million of stock, acquiring 1.1 million shares at an average price of $41.50.

These results, along with tighter guidance and reduced capital spending, reflect a strategic shift toward cash generation over expansion, aiming to convert operational gains into stronger cash flow.