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Meat processor Tyson Foods Inc. (TSN - Analyst Report) is set to report its third quarter of fiscal 2013 results on Aug 5, 2013, before the opening bell. Last quarter, it posted a 21.7% negative surprise. Let’s see how things are shaping up for this announcement.

Why a Likely Positive Surprise?

Our proven model shows that Tyson is likely to beat earnings because it has the right combination of two key ingredients.

Positive Zacks ESP: Expected Surprise Prediction or ESP (Read: Zacks Earnings ESP: A Better Method), which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is at 11.86%. This is very meaningful and a leading indicator of a likely positive earnings surprise for shares.

Zacks #2 Rank (Buy): Tyson carries a Zacks Rank #2 (Buy). Note that stocks with Zacks Ranks of #1, 2 or 3 have a significantly higher chance of beating earnings. The Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement. 

The combination of Tyson’s Zacks Rank #2 (Buy) and 11.86% ESP makes us very confident about a positive earnings beat on Aug 5.

What is Driving the Better-than-Expected Earnings?

Tyson’s continuous product innovations and strong momentum in most of its business segments will help the company to post modest gains in the third quarter..

There is a general shift of demand among health conscious consumers from red meat toward low-calorie chicken and processed chicken food items. This has helped the chicken meat business and the processed food items gain popularity in the recent past quarters.

Tyson’s endeavor to adapt to the changing demand of low-calorie protein foods is encouraging. For fiscal 2013, it has plans to enhance its lineups of hand-held, on-the-go food items by adding some whole-grain items and bolder flavors. Moreover, Tyson plans to add more gluten-free items in its gluten free line of products keeping in view the increase in health consciousness and a general shift among the consumers toward nutritious food products.

Corn prices have stabilized due to record harvest in 2013. This is expected to impact Tyson’s margin favorably by lowering input cost as corn is used as feed for chicken by the company.

Other Stocks to Consider

Here are some other companies worth considering as our model shows that they have the right combination of elements to post an earnings beat this quarter:

  • Pilgrims Pride Corporation (PPC - Snapshot Report)), Earnings ESP of +3.57% and a Zacks Rank #2 (Buy)
  • Sanderson Farms Inc. (SAFM - Snapshot Report), Earnings ESP of +5.66% and a Zacks Rank #3 (Hold)
  • Kraft Foods Group Inc. (KRFT - Analyst Report), Earnings ESP of +10.45% and a Zacks Rank #3 (Hold)

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