- 1. Sales Growth Driven by Volume Net sales increased 1% to $1.1 billion, with 8% volume growth offset by 8% price mix decline.
- 2. Adjusted EBITDA Decline Adjusted EBITDA fell $9 million to $286 million, impacted by unfavorable price mix but partially offset by cost savings and lower manufacturing costs.
- 3. Strong Free Cash Flow Generated $375 million in free cash flow for the first half of fiscal 2026, with $530 million in operating cash flow.
- 4. Dividend Increase and Share Buybacks Approved a 3% dividend hike and repurchased $40 million in shares during Q2, reflecting capital return confidence.
- 5. North America Volume Momentum North America volume rose 8% in Q2, benefiting from customer wins and higher chain customer demand, though price mix headwinds persist.
Segment Performance
The North American segment was strong, with volume up 8% in the quarter, driven by share gains and customer wins despite softer restaurant traffic. The company restarted curtailed production lines in North America to meet customer expectations and ensure fill rates, with utilization rates in North American facilities now in the low nineties and more optimal. In international markets, Lamb Weston faces challenges, including a strong crop in Europe, leading to lower-cost raw materials, and soft traffic.
Cash Flow and Dividend
The company generated $530 million of cash from operations and $375 million of free cash flow in the first half of the year, with the board approving a 3% increase to the quarterly dividend. Lamb Weston repurchased $40 million of shares during the second quarter and remains below its 3.5 times leverage target, prioritizing capital allocation, including opportunistic share repurchases, investing in the business, and returning cash to shareholders.
Outlook and Valuation
Lamb Weston reaffirmed its fiscal 2026 outlook, expecting continued volume growth and strong sales momentum, with adjusted EBITDA guidance ranging from $1 billion to $1.2 billion. With a P/E Ratio of 15.61 and an EV/EBITDA of 9.74, the company's valuation appears reasonable. Analysts estimate next year's revenue growth at 2.6%, and with a Dividend Yield of 3.37% and a Free Cash Flow Yield of 8.17%, the stock offers an attractive return profile.
Strategic Focus
The company is focused on executing its "Focus to Win" strategy, strengthening customer partnerships, and driving cost savings. It has made meaningful changes to its operations and cost structure, and will continue to monitor its mix impact and trends, including the shift from branded to private label products. With improved predictability in the North America business and a confident outlook for volume growth, Lamb Weston is well-positioned for long-term success.