Springdale-based Tyson Foods is expected to post quarterly earnings per share of $1.83, down from $1.34 a year ago, when the company reports earnings on Monday, May 9. Analysts’ consensus estimate is $683.9 million in net profit on revenue of $12.792 billion, up 13.2% from a year ago.
Stephens Inc. analysts forecast earnings for Tyson that are “well positioned to outperform in the current market environment.” Stephens analyst Ben Bienvenu recently said Tyson shares were undervalued. It also raised its second-quarter earnings estimate to $2.01 per share, largely reflecting an increase in beef operating profit and improved revenue in the chicken segment. He also predicts that cost pressures will weigh on margins in Tyson’s prepared foods segment. Bienvenu is more optimistic than the average consensus, maintains its overweight rating and expects stocks may rise on better-than-expected net profit. (Stephens provides investment banking services for Tyson Foods and is compensated accordingly for these functions.)
Bienvenu said Tyson’s beef business was strong in the second quarter with cuts values up relative to cattle prices. US consumer demand is also strong with robust exports despite rising prices. He expects Tyson’s beef segment to post gross net income of $631 million for the quarter, up from $445 million a year ago.
The chicken business is expected to post gross profits of $166 million, up sharply from $6 million a year ago. Higher feed grain prices are being offset by higher cut values which are boosting processing margins. Bienvenu said production was below capacity due to some herd issues and supply chain disruptions. He said demand was high ahead of the summer grilling season.
“We believe the current environment allows Tyson to generate significantly higher margins this year. We are confident that this strong chicken industry backdrop could persist well into 2023,” Bienvenu noted last month.
Tyson’s pork and prepared foods segments are expected to post net income of $65 million, down from $67 million a year ago. The pork segment is experiencing declining operating margins due to limited pork supplies, driving up pork costs. The prepared foods segment is expected to post an estimated operating profit of $153 million, compared to $217 million a year ago. Rising raw material costs continue to squeeze margins in this segment. Tyson’s price increases take a while to materialize.
Piper Sandler analysts recently downgraded Tyson Foods stock to a short or “underweight” position. The downgrade came after the investment house polled consumers on cutting spending on basic commodities. The survey found that 60% of respondents said they had already started buying less of a given grocery category due to inflation. Piper Sandler analyst Michael Lavery said the meat and grain categories could be the hardest hit by rising grain costs and reduced consumer spending.
Shares of Tyson Foods (NYSE:TSN) closed Thursday at $90.90, down $1.33. Over the past 52 weeks, Tyson shares have traded between $69.88 and $100.72.