Tyson Foods’ (TSN) Second-Straight EPS Sets Up For A Wobbly Trading Day
1:50 pm Monday, November 14th, 2022
Tyson Foods (TSN) quickly reverses today on a less than impeccable Q4 (Sep) report, where the company posted its second-straight earnings miss. On the plus side, TSN also delivered a sizeable sales beat and upside FY23 revenue guidance . Additionally, TSN’s productivity program, detailed one year ago and designed to trim over $1.0 bln in recurring annual savings by the end of 2024, is now well ahead of schedule and expected to be reached by the end of FY23.
The now-accelerated productivity program is no small potatoes. In an environment where cost inflation is constantly pressuring margins, particularly for TSN, which tends to operate at already-slim operating margins of around 8%, the company’s savings plan should help offset the high degree of variability in its product margins each quarter.
Pork also remained a laggard in Q4, being the only segment to experience a volume decline at 1.1% despite prices taking a slight tumble of 1.5%.
Prepared Foods saw a similar story as Chicken, with prices growing by double-digits yr/yr, lifting operating margins by over 400 bps. Although volumes were virtually unchanged, they accelerated dramatically from the 8.5% drop in Q3. TSN also noted that the segment is seeing positive volume momentum exiting the year.
Meanwhile, on a less positive note, Beef will remain under pressure. TSN expects margins of just 2-4% in FY23, a massive drop from the 12.6% delivered in FY22.
Concerns that inflationary pressures will continue to weigh on TSN’s bottom line still exist. However, demand is still present, evidenced by a surge in chicken sales in Q4 and improving Prepared Foods results. Meanwhile, TSN’s relatively small International business is showing considerable signs of recovery, boasting a nearly 22% spike in volumes. Lastly, TSN’s solid Q4 numbers offer clues on what to expect from peer Hormel Foods (HRL), which reports Q4 (Oct) earnings on November 30.
