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Tyson Foods (TSN) to Post Q4 Earnings: What's in the Offing?

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Tyson Foods, Inc. (TSN - Free Report) is likely to report a decline in the bottom line when it reports fourth-quarter fiscal 2020 numbers on Nov 16, before the opening bell. The Zacks Consensus Estimate has remained unchanged in the past 30 days at $1.15, which suggests a deterioration of almost 5% from the figure reported in the year-ago period. Notably, the company delivered an earnings surprise of 55.6% in the last reported quarter.

The Zacks Consensus Estimate for revenues is pegged at $11.1 billion, indicating a rise of 2.1% from the prior-year quarter’s reported figure. This is likely to mark a sharp sequential improvement from a decline of 7.9% witnessed in the last reported quarter.

Tyson Foods, Inc. Price, Consensus and EPS Surprise

Tyson Foods, Inc. Price, Consensus and EPS Surprise

Tyson Foods, Inc. price-consensus-eps-surprise-chart | Tyson Foods, Inc. Quote

Key Factors to Note

Tyson Foods has been witnessing declines in its foodservice channel amid the pandemic. Also, the company’s results in the last reported quarter were affected by coronavirus-led reduced production across all segments stemming from team member shortages and other disruptions. On its earnings call, the company said that it expects to continue facing a slowdown in capacity utilization at its production facilities due to member shortages.

On the flip side, Tyson Foods has been gaining from burgeoning demand in its retail channel, thanks to increased at-home consumption amid the pandemic. In the last reported quarter, the company witnessed higher demand at supermarkets, club stores and other retail channels. In fact, given the rising demand, the company has also shifted part of its foodservice production to concentrate on retail. However, retail volume increases have not been enough to compensate for soft foodservice volumes. Consequently, management expects volume declines in the fourth quarter of fiscal 2020, especially in its Chicken and Prepared Foods units.

Apart from this, the company has been encountering cost-related headwinds due to COVID-19, including escalated costs related to workers’ health, such as personal protection equipment, sanitization of production facilities, testing for coronavirus, various professional fees and bonuses to frontline workers. Additionally, any rise in indirect COVID-19 costs like raw materials, transportation, underutilization and reconfiguration of plant, among others, poses threats to margins.

Nonetheless, Tyson Foods is benefiting from its brand strength, robust geographical reach, and the ability to manufacture locally in its international markets and cater well to the evolving global demand. The company’s export markets have been strong. Another channel performing well is e-commerce, which saw considerable sales growth in the third quarter. The company expects high e-commerce demand in the grocery and foodservice channel.

What the Zacks Model Unveils

Our proven model doesn’t conclusively predict an earnings beat for Tyson Foods this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Tyson Foods currently has a Zacks Rank #2 and an Earnings ESP of 0.00%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks With Favorable Combinations

Here are some companies you may want to consider, as our model shows that these too have the right combination of elements to post an earnings beat this season.

Brown-Forman Corporation (BF.B - Free Report) has an Earnings ESP of +0.97% and a Zacks Rank #2.

General Mills (GIS - Free Report) has an Earnings ESP of +3.59% and a Zacks Rank #3.

Constellation Brands (STZ - Free Report) has an Earnings ESP of +5.37% and a Zacks Rank #3.

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