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In early April, the Zacks Rank pegged Tyson Foods ((TSN - Free Report) ) as a candidate for lower share prices as earnings estimates fell ahead of their quarterly report on May 8.
One area of weaker growth surprised me: beef. I didn't know that this segment was bigger for Tyson than its chicken sales. Here's how Andrew summed it up in April...
"Meanwhile, last quarter, earnings growth was an abysmal -70% year-over-year. The company's lagging beef segment is one factor dragging down Tyson’s growth. In Q1, Tyson’s beef segment declined from $5,002 million to $4,723 million. The slowdown is not isolated to Tyson – the United States Department of Agriculture (USDA) projects fiscal 2023 domestic production to fall roughly 5% in the segment."
Earnings Confirm the Slowdown
On May 8 Tyson Foods came out with a quarterly loss of $0.04 per share versus the Zacks Consensus Estimate of $0.81. This compares to earnings of $2.29 per share a year ago. These figures are adjusted for non-recurring items.
This quarterly report represents an earnings surprise of -104.94%. A quarter ago, it was expected that this meat producer would post earnings of $1.35 per share when it actually produced earnings of $0.85, delivering a surprise of -37.04%.
Over the last four quarters, the company has surpassed consensus EPS estimates just once.
Tyson, which belongs to the Zacks Food - Meat Products industry, posted revenues of $13.13 billion for the quarter ended March 2023, missing the Zacks Consensus Estimate by 3.45%. This compares to year-ago revenues of $13.12 billion. The company has topped consensus revenue estimates three times over the last four quarters.
Zacks Rank Nails the Drop
When Andrew wrote his report in April, analysts had lowered consensus EPS from $4.18 to $2.21, and this dramatic drop in estimates put TSN into the Zacks #5 Rank cellar.
Since the May report (for Tyson's Q2 of fiscal year 2023, ending in September), the consensus has now fallen to $1.48 after that big earnings miss and lowered guidance. This keeps TSN shares at a #5 Rank Strong Sell.
The stock is also still over 20% lower from April levels. Another interesting dynamic is that the stock is well off of its early 2022 peak near $100 since the bear market began.
The reason I find this interesting is that while inflation drove food prices higher for consumers, the producers clearly were hit with higher costs that they couldn't pass along to distributors.
This was something that Andrew also identified in his discussion of declining profit margins for Tyson.
Quarter Breakdown
Tyson management also lowered its revenue guidance for fiscal 2023. This can be accountable to consumers opting for alternatives amid the inflationary landscape, per media sources.
Despite a tough protein market, Tyson Foods has been optimistic about its long-term prospects due to its growth strategies and focus on enhancing margins.
Total Q2 sales were $13,133 million, nearly flat with the year-ago quarter figure. The top line lagged the Zacks Consensus Estimate of $13,602 million. Average price changes had a 3.2% adverse impact on the top line, while total volumes rose 3.3%.
The gross profit in the quarter came in at $527 million, down from the $1,735 million reported in the prior-year quarter. The gross profit, as a percentage of sales, came in at roughly 4%, down from the 13.2% reported in the year-ago quarter.
Tyson Foods’ adjusted operating income plunged 94% to $65 million. The adjusted operating margin contracted to 0.5% from the 8.9% reported in the year-ago quarter.
Segmental Details
Beef: Sales in the segment declined to $4,617 million from the $5,034 million reported in the year-ago quarter. Volumes dropped 2.9% and the average price fell 5.4% in the segment.
Pork: Sales in the segment declined to $1,421 million from the $1,565 million reported in the year-ago quarter. Volumes climbed 1.1%, while the average price tumbled 10.3%.
Chicken: Sales in the segment increased to $4,430 million from the $4,086 million reported in the year-ago quarter. Sales volumes rose 6.4% and the average price increased 2%.
Prepared Foods: Sales in the segment rose to $2,422 million from the $2,393 million reported in the year-ago quarter. Prepared Foods’ sales volumes dipped 0.4% and the average price increased 1.6%.
International/Other: Sales in the segment were $634 million, up from the $565 million reported in the year-ago quarter. Volumes moved up 8% and the average sales price jumped 4.2%.
Bottom line on Tyson: While US chicken consumption is expected to rise to over 100 lbs per capita in this decade, producers face headwinds from rising costs, meat alternatives, and other healthy and/or sustainable choices. This story may not turn around for several quarters. The Zacks Rank will let you know.
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Bear of the Day: Tyson Foods (TSN)
In early April, the Zacks Rank pegged Tyson Foods ((TSN - Free Report) ) as a candidate for lower share prices as earnings estimates fell ahead of their quarterly report on May 8.
My colleague Andrew Rocco wrote about TSN slipping into the cellar of the Zacks Rank on April 10 when shares were trading above $60 and he identified several fundamental trends that led analysts to lower their estimates for the chicken products giant.
One area of weaker growth surprised me: beef. I didn't know that this segment was bigger for Tyson than its chicken sales. Here's how Andrew summed it up in April...
"Meanwhile, last quarter, earnings growth was an abysmal -70% year-over-year. The company's lagging beef segment is one factor dragging down Tyson’s growth. In Q1, Tyson’s beef segment declined from $5,002 million to $4,723 million. The slowdown is not isolated to Tyson – the United States Department of Agriculture (USDA) projects fiscal 2023 domestic production to fall roughly 5% in the segment."
Earnings Confirm the Slowdown
On May 8 Tyson Foods came out with a quarterly loss of $0.04 per share versus the Zacks Consensus Estimate of $0.81. This compares to earnings of $2.29 per share a year ago. These figures are adjusted for non-recurring items.
This quarterly report represents an earnings surprise of -104.94%. A quarter ago, it was expected that this meat producer would post earnings of $1.35 per share when it actually produced earnings of $0.85, delivering a surprise of -37.04%.
Over the last four quarters, the company has surpassed consensus EPS estimates just once.
Tyson, which belongs to the Zacks Food - Meat Products industry, posted revenues of $13.13 billion for the quarter ended March 2023, missing the Zacks Consensus Estimate by 3.45%. This compares to year-ago revenues of $13.12 billion. The company has topped consensus revenue estimates three times over the last four quarters.
Zacks Rank Nails the Drop
When Andrew wrote his report in April, analysts had lowered consensus EPS from $4.18 to $2.21, and this dramatic drop in estimates put TSN into the Zacks #5 Rank cellar.
Since the May report (for Tyson's Q2 of fiscal year 2023, ending in September), the consensus has now fallen to $1.48 after that big earnings miss and lowered guidance. This keeps TSN shares at a #5 Rank Strong Sell.
The stock is also still over 20% lower from April levels. Another interesting dynamic is that the stock is well off of its early 2022 peak near $100 since the bear market began.
The reason I find this interesting is that while inflation drove food prices higher for consumers, the producers clearly were hit with higher costs that they couldn't pass along to distributors.
This was something that Andrew also identified in his discussion of declining profit margins for Tyson.
Quarter Breakdown
Tyson management also lowered its revenue guidance for fiscal 2023. This can be accountable to consumers opting for alternatives amid the inflationary landscape, per media sources.
Despite a tough protein market, Tyson Foods has been optimistic about its long-term prospects due to its growth strategies and focus on enhancing margins.
Total Q2 sales were $13,133 million, nearly flat with the year-ago quarter figure. The top line lagged the Zacks Consensus Estimate of $13,602 million. Average price changes had a 3.2% adverse impact on the top line, while total volumes rose 3.3%.
The gross profit in the quarter came in at $527 million, down from the $1,735 million reported in the prior-year quarter. The gross profit, as a percentage of sales, came in at roughly 4%, down from the 13.2% reported in the year-ago quarter.
Tyson Foods’ adjusted operating income plunged 94% to $65 million. The adjusted operating margin contracted to 0.5% from the 8.9% reported in the year-ago quarter.
Segmental Details
Beef: Sales in the segment declined to $4,617 million from the $5,034 million reported in the year-ago quarter. Volumes dropped 2.9% and the average price fell 5.4% in the segment.
Pork: Sales in the segment declined to $1,421 million from the $1,565 million reported in the year-ago quarter. Volumes climbed 1.1%, while the average price tumbled 10.3%.
Chicken: Sales in the segment increased to $4,430 million from the $4,086 million reported in the year-ago quarter. Sales volumes rose 6.4% and the average price increased 2%.
Prepared Foods: Sales in the segment rose to $2,422 million from the $2,393 million reported in the year-ago quarter. Prepared Foods’ sales volumes dipped 0.4% and the average price increased 1.6%.
International/Other: Sales in the segment were $634 million, up from the $565 million reported in the year-ago quarter. Volumes moved up 8% and the average sales price jumped 4.2%.
Bottom line on Tyson: While US chicken consumption is expected to rise to over 100 lbs per capita in this decade, producers face headwinds from rising costs, meat alternatives, and other healthy and/or sustainable choices. This story may not turn around for several quarters. The Zacks Rank will let you know.