We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Tyson Foods (TSN) Up 2.6% Since Earnings Report: Can It Continue?
Read MoreHide Full Article
It has been about a month since the last earnings report for Tyson Foods, Inc. (TSN - Free Report) . Shares have added about 2.6% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Tyson Foods Lags Q2 Earnings, Sales on Lower Volumes
Tyson Foods posted weaker-than-expected second-quarter fiscal 2017 results, wherein both earnings and sales missed the Zacks Consensus Estimate. Despite strong chicken demand, results were hurt as a fire at two of its plants in the said period disrupted production.
In the second quarter, adjusted earnings of $1.01 per share missed the Zacks Consensus Estimate of $1.06 by 4.7% and declined 5.6% year over year from $1.07 per share due to lower sales volume and margin contraction.
Revenues and Margins
Net sales dipped 0.9% to $9.08 billion mainly due to declines in Beef and Prepared Foods segments. Sales also marginally missed estimates of $9.10 billion by 0.2%. Sales volume decreased 1.9%, while average sales price (ASP) inched up 0.9%.
Tyson's adjusted operating income declined 11.5% to $623 million due to lower sales and higher operating costs. Adjusted operating margin contracted 80 basis points (bps) to 6.9%.
Segment Details
Chicken: Sales in this segment increased 2.2% year over year to $2.8 billion, as 2.0% decline in sales volume was offset by 4.3% higher pricing. Volume declined due to loss from fire at two of its plants, partially offset by higher demand for chicken products. On the other hand, sales price increased driven by favorable sales mix.
Operating income margin declined 440 bps to 8.3%, due to higher operating costs, which decreased $130 million during the quarter.
Beef: Sales in this segment declined 4.2% year over year to $3.5 billion, as both pricing and volume declined 3.1% and 1.1%, respectively. ASP declined due to higher domestic availability of fed cattle supplies and lower livestock costs, while sales volume was hurt by reduction in live cattle processed. However, operating margin expanded 230 basis points to 3.6% on the back of favorable market conditions.
Pork: Pork segment sales grew 9.4% year over year to $1.3 billion driven by 10.9% increase in pricing, offset by 1.3% decline in volumes. Average sales price increased as domestic availability of products decreased due to strong exports. However, volume declined as a result of change in customer demand, partially offset by increased exports. Adjusted operating margin, however, decreased 100 bps to 10.8%.
Prepared Foods: Prepared Foods’ sales declined 2.9% to $1.8 billion due to decline in both volumes and pricing of 2.1% and 0.8%, respectively. Lower sales volumes and lower ASP were attributed to decline in foodservices.
Adjusted operating margin contracted 300 bps to 7.9% due to higher operating costs at some of its facilities as well as increased marketing, advertising and promotion spending.
Other: Sales declined 4.7% to $82 million, as the 7.8% plunge in pricing overshadowed the volume growth of 3%.
Other Financial Update
Tyson exited the quarter with a cash and cash equivalent of $243 million, long-term debt of $5.9 billion and shareholders’ equity of $9.8 billion. During the quarter, the company repurchased 2.1 million shares for $133 million.
During the quarter, the company entered into a merger agreement to acquire all the outstanding shares of AdvancePierre Foods Holdings for approximately $3.2 billion, and assumed $1.1 billion of AdvancePierre's gross debt. The transaction is expected to close during third-quarter fiscal 2017.
The company also announced its intention to sell three non-protein businesses, Sara Lee Frozen Bakery, Kettle and Van’s, which are all a part of its Prepared Foods segment, as part of its strategic focus on protein-packed brands. The projected sales of these businesses total approximately $650 million for fiscal 2017.
Fiscal 2017 Guidance
For fiscal 2017, Tyson anticipates sales (excluding acquisition and sale of businesses) to be flat compared to fiscal 2016 as the company expects to grow sales volume across each segment, offset by the impact of lower beef prices.
The company expects overall domestic protein production (chicken, beef, pork and turkey) to increase roughly 3-4% year over year. The company expects Hillshire Brands synergy estimates for fiscal 2017 of around $675 million. The synergies will lead to higher investment in innovation, product launches as well as help in the strengthening of brands.
The company continues to expect fiscal 2017 earnings guidance of $4.90–$5.05, representing a 12% increase year over year.
How Have Estimates Been Moving Since Then?
Analysts were quiet during the last one month period as none of them issued any earnings estimate revisions.
At this time, the stock has a poor Growth Score of 'F', a grade with the same score on the momentum front. However, the stock was allocated a grade of 'A' on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'C'. If you aren't focused on one strategy, this score is the one you should be interested in.
The company's stock is suitable solely for value based on our styles scores.
Outlook
The stock has a Zacks Rank #3 (Hold). We are looking for an inline return from the stock in the next few months.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Tyson Foods (TSN) Up 2.6% Since Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Tyson Foods, Inc. (TSN - Free Report) . Shares have added about 2.6% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Tyson Foods Lags Q2 Earnings, Sales on Lower Volumes
Tyson Foods posted weaker-than-expected second-quarter fiscal 2017 results, wherein both earnings and sales missed the Zacks Consensus Estimate. Despite strong chicken demand, results were hurt as a fire at two of its plants in the said period disrupted production.
In the second quarter, adjusted earnings of $1.01 per share missed the Zacks Consensus Estimate of $1.06 by 4.7% and declined 5.6% year over year from $1.07 per share due to lower sales volume and margin contraction.
Revenues and Margins
Net sales dipped 0.9% to $9.08 billion mainly due to declines in Beef and Prepared Foods segments. Sales also marginally missed estimates of $9.10 billion by 0.2%. Sales volume decreased 1.9%, while average sales price (ASP) inched up 0.9%.
Tyson's adjusted operating income declined 11.5% to $623 million due to lower sales and higher operating costs. Adjusted operating margin contracted 80 basis points (bps) to 6.9%.
Segment Details
Chicken: Sales in this segment increased 2.2% year over year to $2.8 billion, as 2.0% decline in sales volume was offset by 4.3% higher pricing. Volume declined due to loss from fire at two of its plants, partially offset by higher demand for chicken products. On the other hand, sales price increased driven by favorable sales mix.
Operating income margin declined 440 bps to 8.3%, due to higher operating costs, which decreased $130 million during the quarter.
Beef: Sales in this segment declined 4.2% year over year to $3.5 billion, as both pricing and volume declined 3.1% and 1.1%, respectively. ASP declined due to higher domestic availability of fed cattle supplies and lower livestock costs, while sales volume was hurt by reduction in live cattle processed. However, operating margin expanded 230 basis points to 3.6% on the back of favorable market conditions.
Pork: Pork segment sales grew 9.4% year over year to $1.3 billion driven by 10.9% increase in pricing, offset by 1.3% decline in volumes. Average sales price increased as domestic availability of products decreased due to strong exports. However, volume declined as a result of change in customer demand, partially offset by increased exports. Adjusted operating margin, however, decreased 100 bps to 10.8%.
Prepared Foods: Prepared Foods’ sales declined 2.9% to $1.8 billion due to decline in both volumes and pricing of 2.1% and 0.8%, respectively. Lower sales volumes and lower ASP were attributed to decline in foodservices.
Adjusted operating margin contracted 300 bps to 7.9% due to higher operating costs at some of its facilities as well as increased marketing, advertising and promotion spending.
Other: Sales declined 4.7% to $82 million, as the 7.8% plunge in pricing overshadowed the volume growth of 3%.
Other Financial Update
Tyson exited the quarter with a cash and cash equivalent of $243 million, long-term debt of $5.9 billion and shareholders’ equity of $9.8 billion. During the quarter, the company repurchased 2.1 million shares for $133 million.
During the quarter, the company entered into a merger agreement to acquire all the outstanding shares of AdvancePierre Foods Holdings for approximately $3.2 billion, and assumed $1.1 billion of AdvancePierre's gross debt. The transaction is expected to close during third-quarter fiscal 2017.
The company also announced its intention to sell three non-protein businesses, Sara Lee Frozen Bakery, Kettle and Van’s, which are all a part of its Prepared Foods segment, as part of its strategic focus on protein-packed brands. The projected sales of these businesses total approximately $650 million for fiscal 2017.
Fiscal 2017 Guidance
For fiscal 2017, Tyson anticipates sales (excluding acquisition and sale of businesses) to be flat compared to fiscal 2016 as the company expects to grow sales volume across each segment, offset by the impact of lower beef prices.
The company expects overall domestic protein production (chicken, beef, pork and turkey) to increase roughly 3-4% year over year. The company expects Hillshire Brands synergy estimates for fiscal 2017 of around $675 million. The synergies will lead to higher investment in innovation, product launches as well as help in the strengthening of brands.
The company continues to expect fiscal 2017 earnings guidance of $4.90–$5.05, representing a 12% increase year over year.
How Have Estimates Been Moving Since Then?
Analysts were quiet during the last one month period as none of them issued any earnings estimate revisions.
Tyson Foods, Inc. Price and Consensus
Tyson Foods, Inc. Price and Consensus | Tyson Foods, Inc. Quote
VGM Scores
At this time, the stock has a poor Growth Score of 'F', a grade with the same score on the momentum front. However, the stock was allocated a grade of 'A' on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'C'. If you aren't focused on one strategy, this score is the one you should be interested in.
The company's stock is suitable solely for value based on our styles scores.
Outlook
The stock has a Zacks Rank #3 (Hold). We are looking for an inline return from the stock in the next few months.