Wall Street analysts reduce earnings guidance on Tyson Foods during COVID-19 crisis

Several equity market analysts who follow Tyson Foods have taken a wait-and-see attitude toward the meat giant following challenges the company is facing and will likely face in the next couple of quarters because of COVID-19.

Ken Goldman, an analyst at J.P. Morgan Chase, lowered his estimate for Tyson Foods’ 2020 earnings to $5.03 a share from $5.55, citing the “caution” Tyson Foods execs voiced during a conference call. Goldman noted to investors Tyson’s production costs will be higher and prices lower in the second half of the year. He said Tyson Foods will continue to see higher operating costs as worker absenteeism is higher than normal in plants and the company will continue to take write-downs for donated products and expenses to address COVID-19 outbreaks. Goldman maintained his “buy” rating of Tyson Foods in the May 5 note to investors.

BMO Capital Markets Analyst Kenneth Zaslow also reduced his outlook for Tyson Foods’ earnings from $5.80 per share to $3.58, on the challenges in Tyson Foods’ chicken segment. He said the company is under pressure from COVID-19 – higher costs for bonuses, testing, plant closures and absenteeism – which prompted the earnings reduction. Zaslow said Tyson Foods should benefit from better beef margins, and lower input costs in its prepared foods segment should partially mitigate the chicken challenges. Zaslow reiterated his “buy” rating for Tyson Foods on May 5.

Bryan Spillane, an analyst with Bank of America, cited COVID-19 challenges while downgrading Tyson’s stock to a “neutral” rating from “buy.” He referenced the latest U.S. Department of Agriculture data indicating slaughter rates at beef and pork plants are running 35% and 40% lower, respectively, from pre-COVID-19 levels. The rates should ease in the coming weeks, but they “remain a meaningful headwind” for Tyson operations over the medium term, he said in the investor note.

Ben Bienvenu, an analyst with Stephens Inc., has been somewhat bullish on Tyson Foods but lowered his fiscal 2020 earnings to $3.97 per share, from $5.61. He said lower profit in chicken and issues with the pork and international segments were the reason for the lower guidance. Bienvenu said Tyson’s retail business remains strong in light of a major consumer shift to grocery buying and meat stockpiling as more meals are being consumed at home.

“We think it is likely to take some time before the fundamental picture becomes more clear given the dynamic backdrop … and we have limited visibility into when the earnings for Tyson Foods will look normal,” Bienvenu noted.

He said he will continue to monitor the “unprecedented challenges” from COVID-19 and suggests investors do the same. The new target price is $57 per share, down from $95 in mid-January when Stephens lowered its rating from a “buy/overweight” to “neutral or hold.” That neutral rating was reiterated after the May 5 earnings call.

Analysts with Piper Sandler and Bernstein downgraded Tyson’s rating to neutral and market perform from a buy or more bullish rating prior to COVID-19.

Tyson execs refrained from giving forward guidance, saying the situation remains too fluid with challenges in trying to keep all plants open and running at optimal levels. Tyson CEO Noel White told analysts the impact of COVID-19 is deeper and the most severe he’s witnessed in his 30-plus years in the industry, which included Mad Cow, Avian Flu and export woes.

White said Tyson Foods’ long-term financials and business fundamentals are sound, but there will be some turbulence as the company works through the COVID-19 challenges.

Shares of Tyson Foods (NYSE: TSN) closed Thursday at $57.26, up $2.48. For the past 52 weeks Tyson shares have traded between $42.57 and $94.24. Year-to-date, company shares are down more than 39%.