Fourth-quarter net income expected to be lower at Tyson Foods, revenue higher

Tyson Foods will report fiscal 2019 earnings on Tuesday (Nov. 12) and the fourth quarter results ending Sept. 30. Wall Street expects per share net income of $1.29 per for the quarter and $5.52 for the full year, down 14% from the year-ago on an annual basis.

For the fourth quarter, Tyson likely added about $474 million to the company coffers down from $537 million reported a year ago. Sales in the quarter are expected to be $11 billion, up 10% from the prior year.

The Springdale-based meat giant recently reduced its earnings forecast after reporting short-term challenges impacting its fourth-quarter results. Tyson said it expected full-year earnings between $5.30 and $5.70 per share, which is about 43 cents shy of the company’s previous guidance. For the full year, Tyson Foods is expected to see revenue growth of 6.2% to $42.55 billion, according to the Wall Street consensus.

Tyson has been known to outperform analysts’ expectations in recent years given the number of levers the diverse company can pull to mitigate challenges. Stephens Inc. Analyst Ben Bienvenue is a little more bullish than the street, expecting fourth-quarter earnings of $1.58, nearly flat with the year-ago period. Analysts have said the beef industry has mostly recovered from the Tyson fire that disrupted processing capacity in the recent quarter. Bienvenue said Tyson’s turnaround in chicken also took longer than expected and the company continues to invest in innovation and food safety.

Wall Street expects Tyson’s operating profit of $871.2 million in the fourth quarter, up from $831 million a year ago. The company is expected to post an operating income of $208 million in its chicken segment with an average operating margin of 6%. This would be a 14.4% gain over a year ago. The company’s beef segment in the fourth quarter faced disruption in processing and expenses for repairs and added supply chain costs for re-routing cattle for processing from the disabled plant. Tyson is expected to report beef operating income of $330 million in the quarter, down about 5% from the year-ago period. Beef packer margins remain high for the industry with an average of roughly $300 per head in the recent quarter.

The pork segment is believed to have operating profits of about $63 million in the quarter at a 4.5% operating margin. That compares to $76 million reported a year ago with operating margins at 6.7%. The prepared foods segment is expected to report fourth-quarter profits of $251.6 million with an operating margin of 12%. That compares to $235 million a year ago with an operating margin of 11.2%. Through acquisitions, Tyson has also grown its international footprint. The company’s international operating income is expected to be $17.3 million for the quarter, compared to a loss of $10 million a year ago.

Bienvenue and other industry analysts have said Tyson is in a good position to benefit from the global protein gap resulting from African Swine Fever that has resulted in a 55% loss of swine herds in China, the world’s largest market.

“We see many of these issues as transitory in nature and remain positively inclined on the (Tyson Foods) stock moving into FY20 given the backdrop of ASF driven protein inflation. Tyson remains our top pick and we reiterate our overweight rating and $95 price target, Bienvenue noted. (Stephens Inc. conducts investment banking services with Tyson Foods and is compensated accordingly.)

Tyson Foods shares (NYSE: TSN) are up more than 50% this year. Shares closed Friday at $82.50, down 75 cents on the day. Over the past 52 weeks, the shares have traded between $49.77 and $94.07. Tyson’s share price peaked in early September prior to the company’s downward guidance announcement from management.