Tyson Foods is expected on Monday (Nov. 14) to report fourth-quarter net income of $577 million for the period ending Sept. 30. Estimated earnings per share of $1.60 would be down 43.75% from the same period last year.
The consensus estimate is fourth-quarter revenue of $13.49 billion, up 5% year-over-year due largely to price increases. For the full fiscal year, revenue is expected to top a record $52.92 billion, rising 12.5% year over year. For fiscal year 2022, Wall Street consensus calls for earnings per share of $8.74 per share, up 5.5% from the year-ago period.
Despite the mixed results, analysts have reduced earnings predictions in recent weeks, with Stephens Inc. trimming their quarterly net earnings estimate from $1.84 per share to $1.60 in mid-October. While Stephens Inc. maintained its overweight rating on the stock, the analysts cited the higher chances of an earnings miss from the Springdale-based meat giant as lower beef and pork margins may be somewhat offset by an improving chicken segment. (Stephens Inc. conducts investment banking services for Tyson Foods on occasion and is compensated accordingly.)
Bank of America analysts this week turned negative on Tyson Foods with a downgrade on the meat stock to an “Underperform” (sell) rating from its previous perch of Neutral. Analyst Peter Galbo noted Tyson’s turnaround in chicken appears to be working but said broader weakness in the meat industry could reduce income in the short term. Galbo also said potential market share issues in prepared foods and ongoing input cost challenges could pressure Tyson’s earnings in upcoming quarters.
Industry beef packing margins averaged $308.93 per head during Tyson’s fourth quarter, down from $1,447 in the year-ago period and well below the five-year average of $995 per head. Stephens said capacity constraints and a higher U.S. dollar have hindered beef exports. Stephens also reported the cutout values – the sum of the parts – were down 14.2% year-over-year and 1.2% lower from the prior quarter. Stephens analysts Ben Bienvenu has said beef packer margins are expected to remain low into 2023.
Pork packer margins in the quarter fell 3.8% from the prior quarter and fell 48.4% from the year-over-year period. Cutout values were down 1.4% for the year but rose 6.8% from the previous quarter.
Stephens estimated chicken processing margins averaged 30 cents per pound lower in the quarter and 16 cents lower per pound than in the previous quarter at just 3 cents per pound. The chicken business continues to experience the challenges of lower breast prices and elevated feed costs. Corn prices averaged $6.73 per bushel in the quarter, up 14% from the prior year. Soybean meal prices, the other major feed ingredient, saw prices jump 33% in the quarter from the previous year.
Bienvenu said Tyson Foods is positioned well for the long term, but there could be bumps along the way, which is why he remains bullish on the company. Stephens Inc. has a one-year target price of $85, while the broader consensus target price is $85.90. Bank of America on Wednesday cut its price target on Tyson Foods from $73 per share down to $61.
Tyson executives will hold an earnings call on Monday ahead of the market opening. It is uncertain if Chief Financial Officer John R. Tyson takes part in the call following his arrest for public intoxication and criminal trespass on November 6 in Fayetteville. Tyson apologized in an internal email.
“I am embarrassed for personal conduct that is inconsistent with my personal values, the company’s values and the high expectations we hold for each other here at Tyson Foods,” Tyson wrote. “I made a serious mistake and this has caused me to reflect deeply on the impact my actions can have on others.”
Tyson said he is seeking counsel for his drinking.
Shares of Tyson Foods (NYSE: TSN) traded higher on Thursday, buoyed by overall market surges as a lower Consumer Price Index showed a decline in inflation. Shares closed at $66.46, up $2.35. During the past 52 weeks, the share price has ranged between $62.94 and $100.72.