Tyson Foods returned solid fiscal 2020 results earlier this week with higher-than-expected profits, led by a 50% gain in fourth-quarter net income. Revenue fell short of estimates at $10.64 billion. Tyson’s net income was up 2.17% for the year with revenue dipping to $42.365 billion.
Equity analysts applauded the results but also took pause with COVID-19 challenges that are likely to persist well into fiscal 2021. Tyson said it spent $540 million in direct costs related to COVID-19 in 2020 and it forecast $330 million of expected costs in fiscal 2021 based on what is known at this time.
Stephens Inc. analyst Ben Bienvenu reduced his estimate for Tyson’s adjusted per-share earnings for fiscal 2021 to $5.35 from $5.94. Bienvenu said Tyson executed well in a volatile environment which is encouraging. He said the solid results in beef and pork are expected to carry over into 2021, but so are the challenges related to COVID-19 and the underwhelming chicken business performance.
He said Tyson is focused on reducing costs and turning the chicken segment in the right direction for long-term earnings potential. He said grain costs and COVID are still wildcards in 2021 and Stephens will stay neutral on Tyson Foods with a price target of $64. Bienvenu has a brighter outlook for the meat giant in fiscal 2022 with fiscal earnings of $6.15, a growth rate of 15%.
BMO Capital Markets also adjusted earnings after Monday’s earnings. Ken Zaslow, an analyst with BMO Capital, said the new earnings estimate is $5.57 for fiscal 2021. Zaslow said Tyson’s chicken business under the leadership of Donnie King should perform better. King took over management of the chicken segment in September and brings 35 years of experience to the job.
Zaslow said Tyson should benefit from a post-COVID recovery in late 2021 and in early 2022 with the return of foodservice and accelerated chicken exports. Zaslow rates Tyson Foods a “buy” and gives the company an earnings estimate of $5.98 for fiscal 2022.
Shares of Tyson Foods (NYSE: TSN) closed Tuesday closing at $63.78, down 96 cents.During the past 52-week period Tyson shares have traded between $42.57 and $94.24. Year-to-date Tyson’s share price is down 30%.