Market watchers estimate 36% gain in quarterly net income for Tyson Foods

Springdale-based Tyson Foods is predicted to see quarterly earnings per share of $1.83, compared to $1.34 a year ago, when the company reports earnings on Monday (May 9). The consensus estimate among analysts is $683.9 million in net income on revenue of $12.792 billion, up 13.2% from a year ago.

Analysts with Stephens Inc. predict earnings for Tyson that are “well-positioned to outperform in the current market backdrop.” Ben Bienvenu, an analyst with Stephens, recently said Tyson shares are under-valued. He also raised his second-quarter earnings estimate to $2.01 per share, largely reflecting an increase in beef operating income and improving income in the chicken segment. He also predicts cost pressures to weigh on margins for Tyson’s prepared foods segment. Bienvenu is more bullish than the average consensus, maintains his overweight rating, and expects shares could rise on better-than-expected net income. (Stephens conducts investment banking services for Tyson Foods and is compensated accordingly for those duties.)

Bienvenu said Tyson’s beef business was strong in the second quarter with rising cutout values relative to cattle prices. U.S. consumer demand also is strong with robust exports despite rising prices. He expects Tyson’s beef segment to report gross net income of $631 million for the quarter, up from $445 million in the year-ago period.

The chicken business is expected to report gross profits of $166 million, up sharply from $6 million a year ago. Higher grain feed prices are being countered by rising cutout values which boost processing margins. Bienvenu said production is less than capacity because of some flock issues and supply chain disruptions. He said demand is strong ahead of the summer grilling season.

“We think the current environment sets up Tyson to deliver meaningful higher margins this year. We feel confident that this strong chicken industry backdrop could persist into 2023,” Bienvenu noted last month.

Tyson’s pork and prepared foods segments are expected to see net income of $65 million, down from $67 million, a year ago. The pork segment is seeing lower operating margins due to constrained hog supplies which is pushing up hog costs. The prepared food segment is expected to see estimated operating income of $153 million, down from $217 million in the year-ago period. Rising costs of raw materials continue to squeeze margins in this segment. Tyson’s price increases take some time to flow through.

Analysts with Piper Sandler recently downgraded Tyson Foods stock to a sell or “under-weight” position. The downgrade came after the investment house surveyed consumers on reduced spending on basic goods. The survey found 60% of respondents said they have already begun buying less of a given grocery category because of inflation. Michael Lavery, an analyst with Piper Sandler, said meat and cereal categories could be hurt the most from 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.