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Tyson Foods (TSN) Troubled by High Costs, Beef Unit Hurdles
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Tyson Foods, Inc. (TSN - Free Report) faces headwinds due to a tough market scenario, marked by escalated costs and hurdles in the Beef segment.
These factors dented the company’s second-quarter fiscal 2023 results, wherein the bottom line deteriorated year over year and lagged the Zacks Consensus Estimate. Management also lowered its revenue guidance for fiscal 2023. This can be accountable to consumers opting for alternatives amid the inflationary landscape.
A Glimpse of Q2 & Ahead
The company posted an adjusted loss of 4 cents per share, lagging the Zacks Consensus Estimate of earnings of 81 cents. The bottom line significantly declined from earnings of $2.29 reported in the year-ago period. Most of the decline in profits was led by reduced earnings in the Beef and Chicken segments. Total sales were $13,133 million, flat compared with the year-ago quarter figure. The top line missed 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%.
Management anticipates sales in the band of $53-$54 billion for fiscal 2023, flat to up 1%. Earlier, it expected sales in the range of $55-$57 billion.
Image Source: Zacks Investment Research
Cost & Margin Pressure
In the second quarter of fiscal 2023, Tyson Foods’ gross profit came in at $527 million, down from $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 8.9% reported in the year-ago quarter.
The company witnessed elevated input costs per pound in all segments except pork. Most of this was a result of inflated costs of raw materials and labor. The company also saw a decline in pricing due to lower outside meat purchases of chicken and decreased supply-chain costs.
Beef & Chicken Unit Hurdles
In the second quarter of fiscal 2023, sales in Tyson Foods’ Beef segment declined 8.3% to $4,617 million. Volumes dropped 2.9% owing to reduced head processed. The average price fell 5.4% due to lower domestic demand and weaker export markets. The company continued to see increased live cattle costs due to reduced beef herd, which restricted supply.
For fiscal 2023, management expects beef segment margins between a 1% loss and a 1% gain due to the deterioration of the current market scenario. For the Beef segment, U.S. Department of Agriculture projects domestic production to fall 4% year over year in fiscal 2023.
Although Chicken segment sales increased in the second quarter, the macro environment remained difficult. Commodity prices for chicken cuts were quite lower compared with the year-ago period. Prices of boneless breast meat, tenders, and wings declined more than 50%. Further, the company saw a rise in feed ingredient costs. On its second-quarter earnings call, management stated that the key export markets remain closed due to the high-path avian influenza.
Wrapping Up
Focus on core strategies, such as driving growth across the core protein platform, bodes well for Tyson Foods. The company’s growth strategy is based on three main pillars. Firstly, it includes driving growth across the core protein platform. Secondly, it aims to fuel growth through its robust brands, which include more than 30 prepared food and snacking brands. Thirdly, Tyson Foods is focused on prudent international expansion.
However, we cannot ignore the aforementioned hurdles, at least in the near term. This Zacks Rank #5 (Strong Sell) stock has tumbled 13.5% in the past three months compared with the industry’s decline of 3.9%.
Solid Staple Stocks
Some better-ranked consumer staple stocks are The Kraft Heinz Company (KHC - Free Report) , McCormick & Company, Incorporated (MKC - Free Report) and Conagra Brands (CAG - Free Report) .
The Zacks Consensus Estimate for The Kraft Heinz Company’s current fiscal-year sales and earnings suggests growth of 2.8% and 3.6%, respectively, from the year-ago reported figures.
McCormick, which operates as a manufacturer, marketer and distributor of spices, seasonings, specialty foods and flavors, currently carries a Zacks Rank #2. MKC has a trailing four-quarter negative earnings surprise of 3.7%, on average.
The Zacks Consensus Estimate for McCormick’s current fiscal-year sales and earnings suggests growth of 6.4% and 3.6%, respectively, from the year-ago reported numbers.
Conagra Brands, which operates as a consumer-packaged goods food company, currently carries a Zacks Rank #2. CAG has a trailing four-quarter earnings surprise of 13.2%, on average.
The Zacks Consensus Estimate for Conagra Brands’ current fiscal-year sales and earnings suggests growth of 7.1% and 16.5%, respectively, from the year-ago reported numbers.
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Tyson Foods (TSN) Troubled by High Costs, Beef Unit Hurdles
Tyson Foods, Inc. (TSN - Free Report) faces headwinds due to a tough market scenario, marked by escalated costs and hurdles in the Beef segment.
These factors dented the company’s second-quarter fiscal 2023 results, wherein the bottom line deteriorated year over year and lagged the Zacks Consensus Estimate. Management also lowered its revenue guidance for fiscal 2023. This can be accountable to consumers opting for alternatives amid the inflationary landscape.
A Glimpse of Q2 & Ahead
The company posted an adjusted loss of 4 cents per share, lagging the Zacks Consensus Estimate of earnings of 81 cents. The bottom line significantly declined from earnings of $2.29 reported in the year-ago period. Most of the decline in profits was led by reduced earnings in the Beef and Chicken segments. Total sales were $13,133 million, flat compared with the year-ago quarter figure. The top line missed 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%.
Management anticipates sales in the band of $53-$54 billion for fiscal 2023, flat to up 1%. Earlier, it expected sales in the range of $55-$57 billion.
Image Source: Zacks Investment Research
Cost & Margin Pressure
In the second quarter of fiscal 2023, Tyson Foods’ gross profit came in at $527 million, down from $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 8.9% reported in the year-ago quarter.
The company witnessed elevated input costs per pound in all segments except pork. Most of this was a result of inflated costs of raw materials and labor. The company also saw a decline in pricing due to lower outside meat purchases of chicken and decreased supply-chain costs.
Beef & Chicken Unit Hurdles
In the second quarter of fiscal 2023, sales in Tyson Foods’ Beef segment declined 8.3% to $4,617 million. Volumes dropped 2.9% owing to reduced head processed. The average price fell 5.4% due to lower domestic demand and weaker export markets. The company continued to see increased live cattle costs due to reduced beef herd, which restricted supply.
For fiscal 2023, management expects beef segment margins between a 1% loss and a 1% gain due to the deterioration of the current market scenario. For the Beef segment, U.S. Department of Agriculture projects domestic production to fall 4% year over year in fiscal 2023.
Although Chicken segment sales increased in the second quarter, the macro environment remained difficult. Commodity prices for chicken cuts were quite lower compared with the year-ago period. Prices of boneless breast meat, tenders, and wings declined more than 50%. Further, the company saw a rise in feed ingredient costs. On its second-quarter earnings call, management stated that the key export markets remain closed due to the high-path avian influenza.
Wrapping Up
Focus on core strategies, such as driving growth across the core protein platform, bodes well for Tyson Foods. The company’s growth strategy is based on three main pillars. Firstly, it includes driving growth across the core protein platform. Secondly, it aims to fuel growth through its robust brands, which include more than 30 prepared food and snacking brands. Thirdly, Tyson Foods is focused on prudent international expansion.
However, we cannot ignore the aforementioned hurdles, at least in the near term. This Zacks Rank #5 (Strong Sell) stock has tumbled 13.5% in the past three months compared with the industry’s decline of 3.9%.
Solid Staple Stocks
Some better-ranked consumer staple stocks are The Kraft Heinz Company (KHC - Free Report) , McCormick & Company, Incorporated (MKC - Free Report) and Conagra Brands (CAG - Free Report) .
The Kraft Heinz Company, a food and beverage product company, currently has a Zacks Rank #2 (Buy). KHC has a trailing four-quarter earnings surprise of 10.7%, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for The Kraft Heinz Company’s current fiscal-year sales and earnings suggests growth of 2.8% and 3.6%, respectively, from the year-ago reported figures.
McCormick, which operates as a manufacturer, marketer and distributor of spices, seasonings, specialty foods and flavors, currently carries a Zacks Rank #2. MKC has a trailing four-quarter negative earnings surprise of 3.7%, on average.
The Zacks Consensus Estimate for McCormick’s current fiscal-year sales and earnings suggests growth of 6.4% and 3.6%, respectively, from the year-ago reported numbers.
Conagra Brands, which operates as a consumer-packaged goods food company, currently carries a Zacks Rank #2. CAG has a trailing four-quarter earnings surprise of 13.2%, on average.
The Zacks Consensus Estimate for Conagra Brands’ current fiscal-year sales and earnings suggests growth of 7.1% and 16.5%, respectively, from the year-ago reported numbers.