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Time to Buy the Turnaround in Tyson Foods (TSN) Stock After Earnings?

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After easily surpassing its fiscal first quarter earnings expectations on Monday, Tyson Foods (TSN - Free Report)  appears to be putting its struggles in recent years behind it. Tyson’s stock is down -9% in the last year and has fallen -20% over the last three years.

With that being said, TSN shares have rallied +16% in the last three months and investors may be wondering if now is an ideal time to get in on a potential turnaround for the world’s second-largest processor and manufacturer of chicken, beef, and pork.

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Q1 Financial Review

Tyson hasn’t been the only food and meat producer to struggle in the past few years as Hormel Foods (HRL - Free Report)  has seen its stock drop -19% in the last year alone. For Tyson specifically, thinning profit margins have been a concern which is why Q1 earnings of $0.69 a share were exhilarating as it topped the Zacks Consensus of $0.42 a share by a whopping 64%.

This certainly reassured investors despite Q1 earnings dipping from $0.85 a share in the prior-year quarter as adjusted operating income came in at $411 million compared to $453 million a year ago. However, Q1 sales of $13.31 billion did tick up from $13.26 billion in the comparative quarter although this missed estimates by -1%. 

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EPS Growth and Recovery

Addressing its profitability issues, Tyson CEO Donnie King stated the company executed well during Q1 which included a third sequential quarter of adjusted operating income growth driven by the company’s diverse protein portfolio and realization of operational decisions over the past year.

To that point, King said Tyson will continue to prioritize liquidity and financial health going forward with it being noteworthy that the company’s cash and equivalents jumped to $1.48 billion from $573 million at the end of fiscal 2023. Overall, Tyson says it has over $3.7 billion in liquidity.

Furthermore, Tyson’s annual earnings are projected to rebound and climb 57% in FY24 to $2.10 per share compared to $1.34 a share last year. Even better, FY25 EPS is forecasted to soar another 65% to $3.47 a share.

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More importantly, earnings estimates are nicely up over the last week and FY24 and FY25 EPS estimates have now risen 10% and 4% over the last 30 days respectively.

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Supported by the positive trend in earnings estimate revisions it does indeed appear to be a good time to invest in Tyson Foods stock which currently boasts a Zacks Rank #1 (Strong Buy). Along with being on the cusp of a probability rebound rising earnings estimates also make Tyson’s stock more attractive in terms of its P/E valuation and the company’s 3.54% annual dividend yield should continue to support patient investors.

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