A month has gone by since the last earnings report for Tyson Foods (
TSN Quick Quote TSN - Free Report) . Shares have lost about 4% in that time frame, underperforming 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 Q2 Earnings Top Estimates, Sales Up Y/Y
Tyson Foods posted impressive second-quarter fiscal 2022 results, with the top and the bottom line increasing year over year. Sales and earnings surpassed the Zacks Consensus Estimate. Management highlighted that better operational execution and solid customer and consumer demand for its brands and products are contributing to the upside. Management raised its fiscal 2022 sales view.
Quarter in Detail
Adjusted earnings came in at $2.29 per share, beating the Zacks Consensus Estimate of $1.83. The bottom line rallied 71% year over year.
Total sales came in at $13,117 million, up 16.1% from $11,300 million reported in the year-ago quarter. The top line surpassed the Zacks Consensus Estimate of $12,432.3 million. Gains from average price change were 17.6%, while total volumes inched down 1.5%. Gross profit in the quarter came in at $1,735 million, up from $1,253 million reported in the prior-year quarter. Gross profit, as a percentage of sales, came in at 13.2%, up from 11.1% reported in the year-ago quarter. Tyson Foods’ adjusted operating income increased 57% to $1,161 million. Adjusted operating margin expanded to 8.9% from 6.5% reported in the year-ago quarter. Segment Details Beef: Sales in the segment increased to $5,034 million from $4,046 million reported in the year-ago quarter, on solid global demand. These were somewhat offset by a challenging labor environment and ongoing supply chain constraints. Volume inched up 0.6% and the average price increased 23.8% in the segment. Pork: Sales in the segment increased to $1,565 million from $1,477 million reported in the year-ago quarter. Sales volume declined 4.8%, mainly owing to the adverse impacts stemming from the tough labor environment. The average price increased 10.8% owing to increase input costs like live hogs, labor, freight and transportation costs. These were somewhat offset by an unfavorable mix related to labor shortages. Chicken: Sales in the segment increased to $4,086 million from $3,553 million reported in the year-ago quarter. Sales volume inched up 0.6%, mainly driven by a solid demand environment somewhat offset by supply chain constraints. The average price increased 14.4% on the impacts of pricing actions undertaken amid the inflationary cost environment. Prepared Foods: Sales in the segment rose to $2,393 million from $2,164 million reported in the year-ago quarter. Prepared Foods’ sales volume declined 5.3%, thanks to reduced production throughput stemming from tough labor and supply environment as well as uneven foodservice recovery. Divestiture of its pet treats business (concluded in fourth-quarter fiscal 2021) also hurt the metric. The average price increased 15.9%, mainly owing to the effects of revenue management through an inflationary cost environment and a positive product mix. International/Other: Sales in the segment were $565 million, up from $487 million reported in the year-ago quarter. Volume moved up 5.1%, while average sales price jumped 10.9%. Other Financial Updates
The company exited the quarter with cash and cash equivalents of $1,151 million, long-term debt of $8,270 million and total shareholders’ equity (including non-controlling interests) of $19,156 million. In six months ended Apr 2, 2022, cash provided by operating activities amounted to $1,224 million. Liquidity was $3.4 billion as of Apr 2, 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.
For fiscal 2022, the USDA projects domestic protein production (beef, pork, chicken and turkey) to be relatively in-line 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 over $400 million in fiscal 2022, relative to a fiscal 2021 cost baseline. Management is on track to achieve its fiscal 2022 productivity savings. Management now anticipates sales in the $52-$54 billion in fiscal 2022. Earlier, the metric was anticipated 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 grow less than 1% year over year in fiscal 2022. For Pork, domestic production is projected to decline almost 3% year over year in fiscal 2022, per the USDA. USDA forecasts production in the Chicken segment to improve by nearly 1% in fiscal 2022. For fiscal 2022, the company expects lower results from its foreign operations in the International/Other segment owing to supply chain disruptions and other pandemic-induced impacts.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month.
At this time, Tyson has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Tyson has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Tyson is part of the Zacks Food - Meat Products industry. Over the past month, Pilgrim's Pride (
PPC Quick Quote PPC - Free Report) , a stock from the same industry, has gained 13%. The company reported its results for the quarter ended March 2022 more than a month ago.
Pilgrim's Pride reported revenues of $4.24 billion in the last reported quarter, representing a year-over-year change of +29.5%. EPS of $1.18 for the same period compares with $0.42 a year ago.
For the current quarter, Pilgrim's Pride is expected to post earnings of $1.17 per share, indicating a change of +85.7% from the year-ago quarter. The Zacks Consensus Estimate remained unchanged over the last 30 days.
Pilgrim's Pride has a Zacks Rank #1 (Strong Buy) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of B.