Lamb Weston has forecast annual sales and profit above estimates, betting on higher prices as well as steady demand for its ready-to-cook french fries and other potato appetisers, sending its shares up 3% in premarket trading.
The food processing group, which is headquartered in Idaho and counts McDonald's among one of its biggest customers, has benefited from raising prices to protect margins from elevated costs and has seen little resistance even as still-high inflation squeezes customer budgets.
In April, Lamb Weston said traffic growth at quick-service restaurants, including burger and chicken restaurant chains, was helping drive demand for its fries.
The company's total net sales surged 47% to $1.70 billion (€1.54 billion) in the fourth quarter ended May 28, compared with analysts' estimate of $1.66 billion (€1.5 billion), according to Refinitiv IBES data.
Its overall average selling prices increased 24%, but volumes fell 10%, due to a slowdown in casual and full-service restaurant traffic and inventory destocking by certain customers in the U.S. retail channel.
Full- Year Expectations
Still, Lamb Weston expects annual net sales between $6.7 billion (€6.05 billion) and $6.9 billion (€6.24 billion), largely above analysts' expectations of $6.79 billion (€6.14 billion).
It also forecast earnings per share between $4.95 and $5.40 for full year 2024, compared with analysts' average expectation of a profit of $5.01.
The upbeat forecast comes at a time when packaged food peers including Conagra Brands and General Mills have forecast dour annual results as higher prices take a toll on demand for their products.