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Bear of the Day: Tyson Foods (TSN)

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Tyson Foods (TSN - Free Report) , the once mighty powerhouse in chicken, beef and pork has hit a rough patch lately. Slowing volume in the market for protein combined with a reduced market for exports due to tariffs and rising costs have hurt margins and earnings.

Late in July, Tyson warned that full year net earnings would likely be $5.70 - $6.00/share, down from previous guidance of $6.55 - $6.70/share. In the announcement, CEO Tom Hayes explained, “The combination of changing global trade policies here and abroad, and the uncertainty of any resolution have created a challenging market environment of increased volatility, lower prices and an oversupply of protein.” The Zacks Consensus Estimate subsequently fell from $6.57/share to $6.03/share and have been reduced ever further since then.

Tyson shares have fallen sharply recently and the stock is currently a Zacks Rank #5 (Strong Sell).

Increased feed costs and reduced demand for exports have hurt the firm just as the cost of transportation has increased.

When Tyson reported Q2 earnings on August 6th, net earnings were $1.50/share, beating lowered estimates by $0.17/share, but 7% behind the second quarter of 2017.

Full year expectations are lower as well, with the Zacks Consensus Estimate for 2018 earnings currently at $5.89/share, down from $6.55/share just 60 days ago. Estimates for 2019 have been similarly reduced and now stand at $6.00/share, having been as high as $6.90 recently. 

Tyson has also has several issues in the recent past involving air and water pollution, the immigration status of employees, price manipulation and the unethical treatment of animals.

Investors in the food space would be better served to consider ConAgra Brands (CAG - Free Report) or Pinnacle Foods (PF - Free Report) , both Zacks Ranks #2 (Buy) with better cost structure and more stable pricing power.




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