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Why Is Tyson Foods (TSN) Up 9.4% Since the Last Earnings Report?
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It has been more than a month since the last earnings report for Tyson Foods, Inc. (TSN - Free Report) . Shares have added about 9.4% 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 the most recent earnings report in order to get a better handle on the important drivers.
Tyson Foods Posts Upbeat Q4 Earnings & Sales
Tyson Foods posted better-than-expected results in fourth-quarter fiscal 2017, wherein earnings and sales surpassed the Zacks Consensus Estimate. The company reported adjusted earnings of $1.43 per share that outpaced the estimate of $1.38 and improved 49% year over year. The results mainly benefitted from strong performance by the Beef and Chicken segments.
Revenues and Margins
Net sales increased 10.8% to $10,145 million primarily on improved sales across all food segments and beat the Zacks Consensus Estimate of $9,951 million. Sales volume increased 3.2% during the quarter, while average sales price rose 7.3%.
Tyson Foods' adjusted operating income increased 53.9% to $902 million owing to improved performance by Chicken, Beef, Pork and Prepared Food categories. Adjusted operating margin expanded 250 basis points (bps) to 8.9%.
Segment Details
Chicken: Sales for the segment were $3,035 million. Sales volume increased 4.1% year over year owing to higher demand for chicken products and increased volumes, resulting from the AdvancePierre buyout. Average sales price in the quarter increased 3.7% due to change in sales mix. Adjusted operating income rose 46.4% to $322 million, while adjusted operating margin expanded 280 bps to 10.6% during the quarter.
Beef: Sales for the segment were $3,808 million. Sales volume rose 3.3% year over year owing to robust domestic demand for beef products, improved availability of cattle supply and higher exports. These factors positively impacted the average sales price, which increased 6%. Adjusted operating income in the quarter was $313 million, up from the prior-year figure of $139 million. Adjusted operating margin expanded 420 bps to 8.2% during the quarter.
Pork: Sales for the segment were $1,362 million. The segment’s sales volume declined 1.2% year over year, thanks to the company’s effort to balance supply with consumers’ demand. Average sales price increased 11.7%. Adjusted operating income for the segment was $124 million depicting a 14.8% increase from the prior-year quarter. Adjusted operating margin increased 40 bps to 9.1%.
Prepared Foods: Sales for the segment were $2,263 million. Prepared Foods’ sales volume grew 9.5% due to incremental volumes arising from the buyout of AdvancePierre. These were partially offset by fall in food service. Average sales price rose 12.5% owing to favorable product mix from the acquisition of AdvancePierre and higher input costs. Adjusted operating income was $152 million in the quarter depicting a 14.3% rise year over year. Adjusted operating margin contracted 50 bps to 6.7%.
Other: Sales for the segment were $92 million. Sales volume and average selling price in the segment declined 2.7% and 1.7%, respectively. The segment incurred operating loss of $9 million compared with the loss of $14 million in the year-ago quarter.
Fiscal 2017 Results
Sales for fiscal 2017 amounted to $38,260 million depicting a 3.7% increase from the year-ago figure. Adjusted operating income for the year totaled $3,263 million, improving 15.2% from the year-ago figure. Adjusted operating income per share for the fiscal was $5.31, reflecting a 21% growth from the year-ago figure.
Other Financial Update
Tyson Foods, exited the quarter with cash and cash equivalent of $381 million, long-term debt of $9.3 billion and shareholders’ equity of $10.6 billion. Further, management projects capital expenditures at approximately $1.4 billion for fiscal 2018.
On Nov 10, Tyson Foods raised quarterly dividend per share to 30 cents on its Class A shares and 27 cents on its Class B shares. This is payable on Dec 15, 2017, to shareholders of record as of Dec 1.
Guidance
For fiscal 2018, Tyson Foods anticipates sales to amount approximately $41 billion, up 7%. The upside can be attributed to higher revenues from AdvancePierre, increased volumes in its legacy business and enhanced pricing in the Chicken segment. The company envisions fiscal 2018 earnings in the range of $5.70-$5.85 per share, reflecting an increase of 7-10% year over year. The Zacks Consensus Estimate for the fiscal is currently pegged at $5.75.
During the fourth quarter, the company announced a Financial Fitness Program, which is expected to enhance operating efficiency in the forthcoming periods. For fiscal 2018, USDA expects overall domestic protein production (chicken, beef, pork and turkey) to increase roughly 3-4% year over year.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There has been one revision lower for the current quarter.
At this time, Tyson Foods' stock has a nice Growth Score of B, though it is lagging a lot on the momentum front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for value investors than growth investors.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Interestingly, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.
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Why Is Tyson Foods (TSN) Up 9.4% Since the Last Earnings Report?
It has been more than a month since the last earnings report for Tyson Foods, Inc. (TSN - Free Report) . Shares have added about 9.4% 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 the most recent earnings report in order to get a better handle on the important drivers.
Tyson Foods Posts Upbeat Q4 Earnings & Sales
Tyson Foods posted better-than-expected results in fourth-quarter fiscal 2017, wherein earnings and sales surpassed the Zacks Consensus Estimate. The company reported adjusted earnings of $1.43 per share that outpaced the estimate of $1.38 and improved 49% year over year. The results mainly benefitted from strong performance by the Beef and Chicken segments.
Revenues and Margins
Net sales increased 10.8% to $10,145 million primarily on improved sales across all food segments and beat the Zacks Consensus Estimate of $9,951 million. Sales volume increased 3.2% during the quarter, while average sales price rose 7.3%.
Tyson Foods' adjusted operating income increased 53.9% to $902 million owing to improved performance by Chicken, Beef, Pork and Prepared Food categories. Adjusted operating margin expanded 250 basis points (bps) to 8.9%.
Segment Details
Chicken: Sales for the segment were $3,035 million. Sales volume increased 4.1% year over year owing to higher demand for chicken products and increased volumes, resulting from the AdvancePierre buyout. Average sales price in the quarter increased 3.7% due to change in sales mix. Adjusted operating income rose 46.4% to $322 million, while adjusted operating margin expanded 280 bps to 10.6% during the quarter.
Beef: Sales for the segment were $3,808 million. Sales volume rose 3.3% year over year owing to robust domestic demand for beef products, improved availability of cattle supply and higher exports. These factors positively impacted the average sales price, which increased 6%. Adjusted operating income in the quarter was $313 million, up from the prior-year figure of $139 million. Adjusted operating margin expanded 420 bps to 8.2% during the quarter.
Pork: Sales for the segment were $1,362 million. The segment’s sales volume declined 1.2% year over year, thanks to the company’s effort to balance supply with consumers’ demand. Average sales price increased 11.7%. Adjusted operating income for the segment was $124 million depicting a 14.8% increase from the prior-year quarter. Adjusted operating margin increased 40 bps to 9.1%.
Prepared Foods: Sales for the segment were $2,263 million. Prepared Foods’ sales volume grew 9.5% due to incremental volumes arising from the buyout of AdvancePierre. These were partially offset by fall in food service. Average sales price rose 12.5% owing to favorable product mix from the acquisition of AdvancePierre and higher input costs. Adjusted operating income was $152 million in the quarter depicting a 14.3% rise year over year. Adjusted operating margin contracted 50 bps to 6.7%.
Other: Sales for the segment were $92 million. Sales volume and average selling price in the segment declined 2.7% and 1.7%, respectively. The segment incurred operating loss of $9 million compared with the loss of $14 million in the year-ago quarter.
Fiscal 2017 Results
Sales for fiscal 2017 amounted to $38,260 million depicting a 3.7% increase from the year-ago figure. Adjusted operating income for the year totaled $3,263 million, improving 15.2% from the year-ago figure. Adjusted operating income per share for the fiscal was $5.31, reflecting a 21% growth from the year-ago figure.
Other Financial Update
Tyson Foods, exited the quarter with cash and cash equivalent of $381 million, long-term debt of $9.3 billion and shareholders’ equity of $10.6 billion. Further, management projects capital expenditures at approximately $1.4 billion for fiscal 2018.
On Nov 10, Tyson Foods raised quarterly dividend per share to 30 cents on its Class A shares and 27 cents on its Class B shares. This is payable on Dec 15, 2017, to shareholders of record as of Dec 1.
Guidance
For fiscal 2018, Tyson Foods anticipates sales to amount approximately $41 billion, up 7%. The upside can be attributed to higher revenues from AdvancePierre, increased volumes in its legacy business and enhanced pricing in the Chicken segment. The company envisions fiscal 2018 earnings in the range of $5.70-$5.85 per share, reflecting an increase of 7-10% year over year. The Zacks Consensus Estimate for the fiscal is currently pegged at $5.75.
During the fourth quarter, the company announced a Financial Fitness Program, which is expected to enhance operating efficiency in the forthcoming periods. For fiscal 2018, USDA expects overall domestic protein production (chicken, beef, pork and turkey) to increase roughly 3-4% year over year.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There has been one revision lower for the current quarter.
Tyson Foods, Inc. Price and Consensus
Tyson Foods, Inc. Price and Consensus | Tyson Foods, Inc. Quote
VGM Scores
At this time, Tyson Foods' stock has a nice Growth Score of B, though it is lagging a lot on the momentum front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for value investors than growth investors.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Interestingly, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.