Lamb Weston Holdings, Inc. (NYSE: LW) is back in the market’s spotlight this weekend—and not because investors suddenly stopped liking French fries.
After reporting second-quarter fiscal 2026 results that beat Wall Street expectations on revenue and adjusted earnings, Lamb Weston shares still fell sharply as investors zeroed in on what management said comes next: continued discounting, unfavorable price/mix, and higher international manufacturing costs that could keep profitability under pressure into the back half of the year. [1]
Below is what actually happened, what the company guided for fiscal 2026, and how analysts and market watchers are framing the bull case vs. the bear case for LW stock as of 20.12.2025.
What happened to Lamb Weston stock
On Friday (Dec. 19), LW stock dropped nearly 26%, trading in the mid-$40s after investors digested management’s commentary on margins and the second-half setup. [2]
The core issue wasn’t the quarter that just ended—it was the message that pricing actions to support customers (i.e., discounts and trade spend) are still required in a competitive market, while cost pressure remains elevated in parts of the international footprint. [3]
Q2 FY2026 earnings recap: the headline numbers were “fine”
For the quarter ended Nov. 23, 2025, Lamb Weston reported:
- Net sales:$1.618 billion, up about 1% year over year (helped by foreign exchange), with constant-currency sales essentially flat
- Net income:$62.1 million, swinging from a loss a year earlier
- Diluted EPS:$0.44
- Adjusted diluted EPS:$0.69
- Adjusted EBITDA:$285.7 million (down modestly year over year) [4]
Operationally, the quarter looked like this in plain English:
- Volume was up (customers bought more pounds of product)
- Pricing/mix was down (the average revenue per pound fell, and mix tilted toward lower-margin business) [5]
That volume/price tug-of-war is the central plotline for LW right now.
The real story: volumes rose, but pricing power didn’t
Management’s own numbers explain the market’s reaction.
In the quarter, Lamb Weston said an 8% increase in volume was offset by an 8% decline in price/mix (constant currency), leaving sales roughly flat on that basis. The company attributed the weaker price/mix to ongoing price and trade support for customers in a highly competitive global environment. [6]
That’s the investor pain point: it’s hard to expand margins if you’re winning share with discounts—especially when certain costs are moving the other way.
Segment check: North America looks steadier than International
North America: better execution, but discounts still bite
In North America, Lamb Weston reported:
- Net sales essentially flat at about $1.07B
- Volume +8%
- Price/mix -8%
- Segment Adjusted EBITDA rose to roughly $288M, helped by volume and manufacturing efficiencies [7]
Management also noted it restarted previously curtailed North American production lines to maintain service levels and meet demand—suggesting the company has had traction in customer wins and retention. [8]
International: higher costs (Argentina ramp + Europe underutilization)
Internationally, Lamb Weston reported:
- Net sales up 4% (including FX), but down 1% constant currency
- Volume +7%
- Price/mix -8%
- Segment Adjusted EBITDA fell to about $27M, driven by higher manufacturing costs per pound from lower utilization and start-up expenses tied to the new Argentina facility [9]
On the call materials, management was even more explicit: during the Argentina ramp, fixed costs are spread over lower volumes, pushing cost per pound higher for the remainder of the year until utilization improves. [10]
Europe is a key pressure point: strong crop, softer traffic, pricing pressure
One of the clearest explanations for international weakness is Europe.
Management said a strong potato crop has coincided with softer restaurant traffic and lower export demand, as production added in other regions localizes supply. They also noted Europe is “more open and less contracted,” which tends to amplify pricing volatility and pressure. [11]
This matters because even if North America stabilizes, Europe can still drag consolidated margins when pricing is competitive and factories run below optimal utilization.
Costs aren’t just potatoes: tariffs, labor, energy, transport
While potato input dynamics can help (management referenced raw potato deflation benefits in North America), the company called out multiple non-potato cost lines moving higher, including tariffs, labor, fuel/power/water, and transportation rates. [12]
Management also flagged uncertainty around palm oil tariff exemptions (agreements “in principle” were referenced, but not finalized), meaning related expenses remain in forecasts for now. [13]
Fiscal 2026 guidance: reaffirmed, but the tone was cautious
Lamb Weston reaffirmed its fiscal 2026 targets:
- Net sales:$6.35B to $6.55B
- Adjusted EBITDA:$1.00B to $1.20B
- Capex: about $500M [14]
However, multiple reports highlighted what spooked investors: reaffirming the range after a beat can imply the company sees a weaker second half than the Street expected. Reuters cited Jefferies analysts making that exact point. [15]
Management also laid out a specific profitability expectation for the back half:
- Adjusted Gross Margin in the second half is expected to be “flat to down” versus the first half’s 20.4%, reflecting price/mix dynamics and higher international manufacturing costs (Argentina ramp + Europe underutilization). [16]
In other words: revenue may hold up, volume may grow, but margin repair is not guaranteed in the near term.
The demand backdrop: restaurant traffic is soft, but LW is still growing volumes
One nuance in this story is that Lamb Weston’s volumes rose despite a choppy restaurant environment.
Management said U.S. quick-service restaurant (QSR) traffic was flat over August–October, with burger traffic down about 3%, while international restaurant traffic declined in most markets (the U.K., the largest international market, was down about 3%). [17]
Yet Lamb Weston still posted higher volumes, which it attributes to customer wins, share gains, and retention. [18]
That sets up a genuine debate:
- Is LW “buying” volume with discounting that will linger?
- Or is it laying track for a stronger recovery when traffic and pricing normalize?
Shareholder returns and balance sheet: dividend raised, buybacks continue
Even as the company works through margin pressure, it continued to return capital:
- Board approved a 3% dividend increase to $0.38/share quarterly (payable Feb. 27, 2026; record date Jan. 30, 2026) [19]
- In Q2, Lamb Weston returned cash via dividends and repurchased stock, with about $308M remaining under the buyback authorization [20]
On liquidity, management cited roughly $1.43B of liquidity (including about $1.35B under a revolver and about $83M cash) and a leverage ratio around 3.1x on a trailing basis. [21]
They also highlighted significantly lower recent capital spending as major growth investments wrapped, and said they expect FY2026 capex to come in below the $500M target. [22]
Analyst forecasts and price targets: big spread, cautious consensus
Consensus targets imply meaningful upside from Friday’s levels
After the selloff to roughly $44, several consensus snapshots show targets well above the current price:
- MarketBeat: consensus rating Hold, average price target $64.89 (high $70 / low $57) [23]
- TipRanks: average price target $65.25 (high $69 / low $60), consensus leaning “Moderate Buy” based on its tracked analyst mix [24]
Read that as: analysts (as a group) still see upside—but not without risk, and not everyone is pounding the table.
Why the market didn’t “reward the beat”
Reports from Barron’s and The Wall Street Journal framed the selloff around a simple idea: profit pressure from discounting and international costs can outweigh an earnings beat, especially if management expectations tilt toward the middle of the EBITDA range rather than the high end. [25]
Reuters also emphasized macro friction: persistent inflation and trade uncertainty pushing consumers to pull back on dining out—bad news for restaurant traffic and, by extension, fry volumes and pricing leverage. [26]
Technical and trading signals: LW broke key levels
From a market-structure standpoint, the move was large enough to trip classic technical flags.
Nasdaq reported that on Friday, LW crossed below its 200-day moving average (about $55.96) and traded down into the mid-$40s, sitting near the low end of its 52-week range. [27]
This doesn’t “predict” fundamentals—but it does matter for how the stock trades in the short term, because some institutions and systematic strategies use these levels to size positions.
The “$31” bear-case debate: Trefis turns cautious
Not all analysis this weekend is optimistic.
Trefis published a notably bearish scenario, arguing LW could potentially fall toward $31 and framing the stock as “risky,” citing concerns around operating performance, financial stability, and downturn resilience even if valuation looks cheaper after the drop. [28]
You don’t have to agree with the $31 call to see what it represents: the market is asking whether Lamb Weston’s turnaround is a straight line (rare in nature) or a two-steps-forward, one-step-back grind where margins remain hostage to pricing and utilization.
The bull case vs. the bear case for Lamb Weston stock right now
Bull case: share gains, volume momentum, and cost savings can compound
The most credible bullish threads, based on management’s own remarks:
- Customer wins and retention are driving volume growth, even in a soft traffic environment [29]
- North America profitability is relatively solid, with manufacturing efficiencies helping offset some inflation [30]
- The company is advancing cost savings and operational initiatives, while capital intensity is coming down from prior expansion cycles [31]
- Over time, Argentina could shift from being a margin drag (ramp costs) to a margin and growth lever—if utilization ramps as planned [32]
Bear case: discounting + mix + international costs keep margins stuck
The bearish read is also straightforward:
- Price/mix has been down sharply (the company itself says price/mix was -8%), and some of that pressure could persist in fiscal 2026 [33]
- Management expects second-half gross margin flat to down vs. first half, with Argentina ramp costs and Europe underutilization called out directly [34]
- Europe faces structural near-term pressure: strong crop, softer traffic, lower exports, and a less contracted pricing environment [35]
- Tariffs and input costs outside potatoes remain a headwind, and trade policy uncertainty adds variability [36]
What to watch next for LW stock
Over the next few quarters, the stock is likely to react most to a short list of variables:
- Price/mix trend: Does discounting moderate, or is it the new normal?
- International utilization: Especially Europe (underutilization) and Argentina (ramp curve).
- Gross margin trajectory: Management already told investors what to expect near-term—will reality come in better or worse?
- Traffic and QSR health: If restaurant traffic improves, pricing pressure may ease; if it worsens, promotions could intensify. [37]
- Capital returns vs. leverage: Dividend growth and buybacks are supportive, but investors will keep one eye on leverage and cash generation. [38]
Lamb Weston is delivering what many turnarounds deliver: progress that’s real, plus volatility that’s unpleasant. The quarter showed stronger volume and better North America execution—but the stock sold off because the path to margin normalization still runs through a swamp of discounting, mix headwinds, and international cost friction.
References
1. www.barrons.com, 2. www.barrons.com, 3. www.wsj.com, 4. investors.lambweston.com, 5. investors.lambweston.com, 6. investors.lambweston.com, 7. investors.lambweston.com, 8. investors.lambweston.com, 9. investors.lambweston.com, 10. investors.lambweston.com, 11. investors.lambweston.com, 12. investors.lambweston.com, 13. investors.lambweston.com, 14. investors.lambweston.com, 15. www.reuters.com, 16. investors.lambweston.com, 17. investors.lambweston.com, 18. investors.lambweston.com, 19. investors.lambweston.com, 20. investors.lambweston.com, 21. investors.lambweston.com, 22. investors.lambweston.com, 23. www.marketbeat.com, 24. www.tipranks.com, 25. www.barrons.com, 26. www.reuters.com, 27. www.nasdaq.com, 28. www.trefis.com, 29. investors.lambweston.com, 30. investors.lambweston.com, 31. investors.lambweston.com, 32. investors.lambweston.com, 33. investors.lambweston.com, 34. investors.lambweston.com, 35. investors.lambweston.com, 36. investors.lambweston.com, 37. investors.lambweston.com, 38. investors.lambweston.com
