Research Notes: Lamb Weston Gets Fried

The long-running debate over LW roars back to the fore

Highlights:

• French fry business Lamb Weston plunged 19% on Thursday, its largest-ever single-day decline.

• The catalyst was a disappointing earnings report, caused by a poorly-executed ERP implementation.

• The bigger issue appears to be structural: industry capacity is on the way, which may exacerbate already slowing demand.

• History says LW is a buy with EV/EBITDA under 10. But investors have to trust their judgment of what this business actually is.