A month has gone by since the last earnings report for Tyson Foods (TSN Quick QuoteTSN - Free Report) . Shares have lost about 6.5% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Tyson due for a breakout? 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 Q1 Earnings Top Estimates, Sales Up Y/Y

Tyson Foods posted impressive first-quarter fiscal 2022 results, with the top and the bottom line increasing year over year. Sales and earnings surpassed the Zacks Consensus Estimate.

Quarter in Detail

Adjusted earnings came in at $2.87 per share, beating the Zacks Consensus Estimate of $1.90. The bottom line rallied 48% year over year.

Total sales came in at $12,933 million, up 23.6% from $10,460 million reported in the year-ago quarter. The top line surpassed the Zacks Consensus Estimate of $11,844 million. Gains from average price change were 19.6%, while total volumes inched up 0.3%.

Gross profit in the quarter came in at $2,015 million, up from $1,177 million reported in the prior-year quarter. Gross profit, as a percentage of sales, came in at 15.6%, up from 11.3% reported in the year-ago quarter. Tyson Foods’ adjusted operating income increased 40% to $1,432 million. Adjusted operating margin expanded to 11.1% from 9.5% reported in the year-ago quarter.

Segment Details

Beef: Sales in the segment increased to $5,002 million from $3,987 million reported in the year-ago quarter. Volume declined 6.2% due to the challenging labor environment and escalated supply chain constraints, which was somewhat offset by solid global demand. The average price increased 31.7% on the back of input cost increases like live cattle, labor, freight and transportation costs as well as solid demand for beef products.

Pork: Sales in the segment increased to $1,626 million from $1,439 million reported in the year-ago quarter. Sales volume inched up 0.2%, owing to solid global demand offset by the impacts of a tough labor environment. The average price increased 12.8% as input costs like live hog, labor, freight and transportation expenses increased along with solid pork products demand.

Chicken: Sales in the segment increased to $3,890 million from $2,831 million reported in the year-ago quarter. Sales volume increased 3.6%, mainly due to higher live production and a solid demand environment. The average price increased 19.9% on impacts of inflationary cost environment.

Prepared Foods: Sales in the segment rose to $2,333 million from $2,113 million reported in the year-ago quarter. Prepared Foods’ sales volume declined 2.6%, thanks to reduced production throughput stemming from tough labor and supply environment. Divestiture of its pet treats business also hurt the metric. The average price increased 13%, mainly owing to effects of revenue management through inflationary cost environment.

International/Other: Sales in the segment were $550 million, up from $469 million reported in the year-ago quarter. Sales volume moved up 9%, while average sales price jumped 8.3%.

Other Financial Updates

The company exited the quarter with cash and cash equivalents of $2,956 million, long-term debt of $8,274 million and total shareholders’ equity (including non-controlling interests) of $18,542 million. In three months ended Jan 1, 2022, cash provided by operating activities amounted to $1,432 million.

Liquidity was $5.2 billion as of Jan 1, 2022. Management expects liquidity to remain above the company’s minimum target of $1 billion. The company projects capital expenditures to be nearly $2 billion for fiscal 2022.

Outlook

For fiscal 2022, the United States Department of Agriculture (“USDA”) projects domestic protein production (beef, pork, chicken and turkey) to be flat compared with fiscal 2021 levels.

Starting from fiscal 2022, management launched a new productivity program to drive a better, faster and more agile organization. The company is projecting to achieve $1 billion in productivity savings by the end of fiscal 2024 and $300-$400 million in fiscal 2022, relative to a fiscal 2021 cost baseline. Management anticipates sales in the upper end of $49-$51 billion in fiscal 2022.

Segment-Wise Guidance for Fiscal 2022

For the Beef segment, USDA projects domestic production to decline nearly 1% year over year in fiscal 2022. For Pork, domestic production is projected to decline almost 2% year over year in fiscal 2022, per the USDA. USDA forecasts production in the Chicken segment to improve nearly 2% in fiscal 2022. The company expects better results from its foreign operations in the International/Other segment.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month.

The consensus estimate has shifted 27.86% due to these changes.

VGM Scores

At this time, Tyson has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top 20% 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.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Tyson has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.