Why Lamb Weston Stock Is Falling 11% Today

What happened

Shares of Lamb Weston (NYSE: LW) are tumbling today, down 11% as of 3:44 p.m. EDT, after the company reported fiscal fourth-quarter results that beat estimates on the top line, but earnings swung to an unexpected loss.

So what

The frozen potato producer reported revenue of $847 million, down almost 16% from last year, but ahead of the consensus estimate of $798 million. However, it posted a loss of $1.6 million, or $0.01 per share, compared to a profit of $110 million a year ago, or $0.75 per share. That fell well short of Wall Street's forecast for EPS of $0.15.

A sack of potatoes with potatoes sitting next to it

Image source: Getty Images.

Now what

The overall decline in performance can be attributed to the coronavirus pandemic that closed off much of Lamb Weston's restaurant and foodservice business.

President and CEO Tom Werner called the final months of Lamb Weston's fiscal year "some of the most challenging in our company's history."

It was evident in today's results from McDonald's, Lamb Weston's largest customer, which accounts for approximately 10% of the potato producer's revenue. The fast-food chain saw sales plunge 30% in the quarter.

And just like McDonald's noted that business was starting to rebound, Lamb Weston said, "As states began to reopen, we saw clear evidence of frozen potato demand steadily strengthening across our restaurant and foodservice channels."

New lockdown orders due to rising cases of COVID-19 could jeopardize demand again.

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Rich Duprey has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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