Tyson Foods reports fiscal year income up 6.2%, revenue up 13.2%

Tyson Foods’ fiscal fourth-quarter net income was down 60%, but the Springdale-based company ended fiscal 2022 with record revenue of $53.282 billion, up 13.2% from the prior year. Net income grew to $3.249 billion, up 6.26% year over year.

The global meat processing, distribution and marketing company missed on its fourth-quarter earnings consensus with an adjusted gross income of $528 million, down 60% from the same period last year. Adjusted earnings per share totaled $1.50 after one-time charges of 13 cents. The consensus estimate among analysts for the quarter was $1.70 per share on an unadjusted basis. Revenue for the quarter was $13.737 billion, up 7.22% from a year ago.

CEO Donnie King said the company delivered record revenue and net income growth for the full year because of continued strength in consumer demand for protein.

“Our results were supported by historically strong operations in our beef segment and improved performance in our chicken segment. We also experienced share gains in both our foodservice categories and retail core business lines,” King said.

Tyson’s full-year operating income totaled $4.41 billion, up slightly from $4.396 billion a year ago. King said Tyson is also making progress on its productivity program announced a year ago with plans to deliver $1 billion in cost savings to the company’s bottom line by 2024. King said the company will realize $700 million in a productivity program in 2022. He said Tyson’s move to automate more lines is progressing faster than previously expected, yielding productivity savings.

“We expect to exceed the $1 billion in productivity savings in fiscal 2023, a year ahead of schedule,” King said.

Tyson said the company reduced debt by about $1 billion for the full year and repurchased 8.2 million shares totaling $702 million.

Tyson expects revenue in the next fiscal year to range between $55 billion and $57 billion, with capital expenditures estimated at $2.5 billion. Tyson expects liquidity to remain above the target of $1 billion. The estimated liquidity as of Oct. 1 was about $3.3 billion.

EXEC MOVES, CORPORATE CONSOLIDATION
Analysts questioned Tyson’s recent promotion of John R. Tyson to chief financial officer and moving previous CFO Stewart Glendinning to head up the company’s prepared foods segment. King said Tyson Foods has a succession planning strategy, is completely comfortable with the moves, and has seen positive contributions from each executive in their new role.

John R. Tyson gave the financial results during the analyst call and apologized for his recent arrest on charges of public intoxication and criminal trespass. King said the company’s independent corporate governance committee is reviewing the incident and will follow the situation. King said the company will wait on the findings, and no outside counsel has been sought. Beyond the apology, John R. Tyson refrained from giving any additional comment on the arrest during Monday’s calls with analysts and media.

King was also asked about the decision to relocate corporate employees in Chicago and Dakota Dunes, S.D., to Springdale. King said there were 1,100 employees who have been asked to relocate. They were to let the company know their intentions by Monday (Nov. 14). King said he and other executives had been out talking with and recruiting the employees to Springdale. Knowing that some would not be able to make the move, King said Tyson has asked them to stay on remotely until a replacement can be hired in Springdale.

“We believe the consolidation into one corporate office will yield benefits, provide continuity and is the right move for Tyson Foods,” King said. “We are better together.”

SEGMENT RESULTS
The beef segment reported an operating income of $375 million, down from $1.147 billion a year ago. The operating margin was 7.7% for the quarter and more in line with historical norms. Beef sales totaled $4.859 billion, down from $5.012 billion a year ago. Sales volumes rose 5.1%, but the average price fell 8.2% year over year.

The pork segment posted operating losses of $55 million in the quarter, compared to $78 million a year ago. Pork sales totaled $1.604 Billion, down slightly from $1.646 billion a year ago. Pork volume sales were down 1.1%, and prices fell 1.5% from a year ago.

Tyson’s chicken segment had fourth-quarter sales of $4.619 billion, up from $3.873 billion a year ago. The segment saw sales volume improve by 1.1%, with an 18.2% jump in prices from a year ago. The chicken segment had an operating income of $340 million in the quarter, reversing an operating loss of $136 million a year ago.

The prepared foods segment had sales of $2.516 billion in the quarter, up from $2.253 billion a year ago. Virtually all of that growth was due to increased pricing year over year. Operating income fell to $111 million, down from $823 million a year ago. The segment’s operating margin was compressed to 4.4% in the quarter largely because of rising costs of ingredients.

Tyson’s international segment had sales of $638 million, up from $546 million a year ago. Operating losses rose to $5 million in the period, compared to losses of $3 million a year ago.

Ben Bienvenu, an analyst with Stephens Inc., said Tyson’s mixed quarter showed improvement in chicken and strong results in beef, despite challenges with pork and prepared foods. He said Tyson’s fiscal 2023 guidance looks better than once feared, with improving margins and strong consumer demand for protein. (Stephens Inc. conducts investment banking services for Tyson Foods on occasion and is compensated accordingly.)

Bank of America analyst Peter Galbo recently downgraded Tyson shares to underperform from a neutral position. Galbo noted that Tyson’s chicken segment is improving, but poor macro conditions in the protein industry could weaken profitability over the medium term. He said beef fundamentals continue to deteriorate, compressing packer margins, and a drop in chicken prices over the next quarter or more could negatively impact Tyson’s chicken margins.

Tyson Foods shares (NYSE: TSN) were down almost 2% in morning trading. Over the past 52 weeks, Tyson shares have traded between $62.94 and $100.72. Tyson Foods shares are down 24% year to date.