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Tyson Foods (TSN) Down 4.3% Since Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Tyson Foods, Inc. (TSN - Free Report) . Shares have lost about 4.3% in that time frame, underperforming the market.

Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Tyson First-Quarter Earnings, Sales Beat Estimates

Tyson Foods posted first-quarter fiscal 2017 results, wherein both earnings and revenues beat the Zacks Consensus Estimate.

In the fiscal first quarter, adjusted earnings of $1.59 per share beat the Zacks Consensus Estimate of $1.27 by 25.1% and surged 38% from the year-ago tally of $1.15 on higher margins.

Revenues and Margins

Net sales inched up 0.3% to $9.2 billion on the back of higher sales across most of the segments like chicken, pork and prepared foods. However, this was offset by lower sales in beef and other segments. Sales beat expectation of $9.0 billion. Sales volume gained 2.4%, while average sales price (ASP) edged down 2%.

Tyson's adjusted operating income gained 27% to $982 million owing to lower feed costs. Adjusted operating margin inflated 220 basis points (bps) to 8.7%.

Segment Details

Chicken: Sales at this segment remained gained 2.7% year over year to $2.706 billion backed by 1.3% dip in sales volume and a 1.4% gain in average price. Sales volume gained as a result of better demand for chicken products, partially neutralized by decrease in rendered product sales. Average sales price increased as a result of sales mix changes which offset general market price declines.

Beef: Sales at this segment declined 2.4% year over year to $3.5 billion, owing to 6.6% drop in average sales price which negated a 4.5% increase in volume.

Pork: Pork segment sales were up 3.2% year over year to $1.3 billion driven by a 4.3% increase in sales volume and a 1% decline in average price.

Prepared Foods: Sales at Prepared Foods remained flat year over year at $1.895 billion as 2.6% gain in volume was offset by 2.9% decline in ASP. Adjusted sales volume grew on higher demand.

Other: In the fiscal first quarter, the company’s International segment was shifted under ‘Other’ following the sale of Mexico and Brazil chicken operations in fiscal 2015. Further, the Other segment includes foreign operations related to raising and processing live chickens in China and India as well as a third-party merger and integration costs.

Sales decreased to $90 million from $99 million in the year-ago quarter.

Fiscal 2017 Guidance

The company raised fiscal 2017 guidance in sync with the earnings call following a solid start to the year. The company anticipates earnings to remain in the range $4.90–$5.05, representing a 12% increase year over year compared with a range of $4.7–$4.85 expected earlier.

Financial Update

Tyson exited the quarter with a cash and cash equivalent of $3.07 million compared with $3.49 million expected earlier. The company had a long-term debt of $5.09 million compared with $6.2 million in the previous quarter.

How Have Estimates Been Moving Since Then?

Following the release, investors have witnessed a downward trend in fresh estimates. There have been three revisions lower for the current quarter. In the past month, the consensus estimate has shifted 7.98% downward due to these changes.

Tyson Foods, Inc. Price and Consensus

 

Tyson Foods, Inc. Price and Consensus | Tyson Foods, Inc. Quote

VGM Scores

At this time, Tyson Foods, Inc.'s stock has a great Growth Score of 'A', though it is lagging a lot on the momentum front with a 'D'. However, the stock was allocated a grade of 'A' on the value side, putting it in the top quintile 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.

Zacks' style scores indicate that the company's stock is suitable for value and growth investors.

Outlook

Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Notably, the stock has Zacks Rank #2 (Buy). We are looking for an above average return from the stock in the next few months.


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