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Lamb Weston Hikes Dividend Despite COVID-19 Related Sales Drop

Justin Kuepper Jan 20, 2021

Lamb Weston Holdings Inc. (LW) is one of the world’s largest producers and processors of frozen French fries and other frozen potato products.

The company generated more than half of its revenue (53.1%) from its global segment—the top 100 North American-based restaurant chains and international customers—while remaining revenue is divided into food service channels outside of the top 100 restaurant chains (26.9%) and consumer-facing retail (15.7%), during FY2021Q2.

McDonald’s Corp. (MCD) is the company’s largest customer and accounted for 10% of consolidated net sales during fiscal 2019 and 2020.

FY2021 Q2 Beats Expectations

Lamb Weston reported its fiscal second quarter revenue fell 12.1% to $896.1 million, beating consensus estimates by $5.97 million, with GAAP earnings of $0.66 per share, beating consensus estimates by three cents per share.

While COVID-19-related restrictions on restaurants adversely impacted its food service business, these results were partially offset by a 7% increase in its retail sales. The company expects softness in the food service business to persist in the near term but is hopeful that the rollout of a COVID-19 vaccine will lead to a return to pre-pandemic levels by year end.

The company reported $764 million of cash and cash equivalents at the end of the quarter after paying off its term facility due in November 2021. Despite depressed sales, the company realized net cash from operating activities of $318.8 million during the quarter, which was more than ample to cover its $67.2 million dividend.

The company raised its quarterly dividend by 2.2% to $0.235 per share, which represents a 1.2% forward yield. The dividend is payable on March 5, 2021 to shareholders on record as of February 5, 2021. In addition, the company plans to resume its share repurchase program in January 2021 following a pause due to the COVID-19 pandemic.

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