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Lamb Weston: Is the King of Spuds a Buy or a Dud for 2026?
Written by Thomas Hughes. Published 10/1/2025.
Key Points
- Lamb Weston reaffirmed its guidance and capital return outlook, driven by solid FQ1 results.
- Buybacks reduce the count substantially each quarter and are expected to continue for the foreseeable future.
- Institutional trends indicate the group is buying aggressively, with shares near long-term lows.
Lamb Weston's (NYSE: LW) fiscal first-quarter report and updated guidance confirm that the king of spuds remains a solid performer. The company reaffirmed its prior guidance, reinforcing confidence in its cash-flow generation and capital-return outlook. As a fast-moving consumer goods (FMCG) firm, Lamb Weston offers an attractive dividend and aggressive share buybacks, supporting long-term investors and positioning for potential double-digit total returns over time.
The company's dividend yield sits at 2.5% in early October, underpinned by a healthy outlook for distribution increases. While the payout ratio—about 60% of earnings—is elevated, it aligns with industry peers. More importantly, the cash-flow payout ratio was only 17% in Q1, suggesting ample room to sustain a double-digit CAGR in distributions.
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Share repurchases are equally robust. Management cut share count by roughly 2% in fiscal 2025 and expects a similar or higher reduction in fiscal 2026. The pace reached over 3.5% in Q1, with ample authorization remaining for continued buybacks.
The balance sheet remains clean. At Q1 end, reduced assets were matched by lower liabilities, resulting in low leverage and higher equity—even after share reductions and capital distributions.
Lamb Weston Sustains Growth in Tough Environment
In its fiscal first quarter, Lamb Weston delivered revenue of $1.66 billion, up 0.5% and surpassing MarketBeat's consensus estimate. Volume rose 6%—including a 1% boost from favorable FX translation—offsetting a 7% decline in price realization.
The price decline reflects the closure of the Washington plant and discontinuation of its product lines, a one-time impact that should reverse and eventually bolster margins. International markets led the way with 4% growth (helped by FX), while North America sales fell 2%.
Margins faced year-over-year pressure, but the declines were smaller than anticipated, largely due to one-off costs and mix shifts related to discontinued products. Crucially, GAAP EPS of $0.74 beat consensus by $0.21—roughly 4,000 basis points—which bodes well for cash flow and future capital returns.
Management reaffirmed full-year revenue guidance, with its midpoint tracking near consensus. The forecast projects modest growth and ample earnings to fund investments and continue returning capital to shareholders.
Analysts Cap Gains for LW: Institutions Are Buying the Value
Analyst sentiment on LW remains tepid, resulting in a Hold rating and trimmed price targets. Although the consensus implies roughly 12% upside in early October, most estimates hover near the low end—which may serve as a support floor, given strong institutional demand.
Institutions own roughly 90% of LW's shares, providing a solid support base. They have been net buyers all year and likely will remain so given the stock's bargain valuation—trading in the low teens based on the 2030 EPS consensus. This implies potential upside of around 50% by then.
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