Tyson Foods posts $97 million quarterly loss, reduces earnings guidance

Tyson Foods reported a second fiscal quarter net income loss of $97 million on Monday (May 8), a wide swing from net income of $829 million in the same quarter last year. Revenue was $13.133 billion, up from $13.117 billion a year ago, but $600 million less than the consensus estimate.

After one-time adjustments for restructuring and plant closures, the net loss per share was 4 cents, down from $2.28 earned a year ago. Tyson fell way short of the 80 cents per share consensus estimate. The earnings miss in the quarter ending March 31 and weaker guidance for fiscal 2023 by Tyson Foods sent the stock tumbling more than 15% in heavy trading Monday morning after the earnings report was posted.

“While the current protein market is challenging, we have a strong growth strategy in place and are bullish on our long-term outlook,” said Donnie King, president and CEO of Tyson Foods. “We saw strong performance in our branded foods business and continue to be laser-focused on meeting customer needs and planning the future with them.”

King said this is not the first time Tyson Foods has seen weak macro-fundamentals, and the company’s strategy will allow for successful and continued growth in the years to come. King said he has never seen all three of the meat segments experience challenges this deep at the same time. But he remains positive about his management’s team turning the ship around.

“I am optimistic that we have people and plan in place to come out of this challenging environment stronger than ever,” King said.

But that turnaround won’t be this year. Tyson Foods reduced margin and profit guidance for the back half of the year due to deteriorating beef processing fundamentals amid higher live cattle costs, weaker exports and softening demand, which makes passing through higher prices problematic. Also, more pork losses partially offset by slowly improving chicken business and sustained strength in the prepared foods segment were part of the fiscal-year forecast.

On an adjusted basis, Tyson’s beef segment had an operating income of $8 million, down from $638 million a year ago. The company’s cash cow suffered from margin deterioration to 0.2% in the quarter, down from a record 12.7% a year ago. Tyson said the beef segment is expected to see margin compression the rest of this year between -1% and 1% based on higher live cattle prices. Tyson’s beef sales totaled $4.617 billion in the quarter, down from $5.034 billion a year ago. Volume was down 2.9%, and prices fell 5.4%.

The pork segment posted an operating loss of $31 million, down from gains of $59 million a year ago. Tyson said the pork margin is also likely to be between -2% and 1% for the rest of this year. Pork segment sales totaled $1.421 billion, down from $1.565 billion a year ago. Volume was up 1.1%, but prices tumbled 10.3%.

Tyson’s chicken business had higher operating losses at $166 million in the quarter, down from an operating income of $203 million a year ago. The operating margin was -3.7% in the quarter, largely because of restructuring, plant closures, and softer pricing.

King said Tyson’s business is improving despite the $166 million quarterly loss. He said the company sold all of the chicken it harvested plus 20% of the excess inventory in the quarter. Tyson reported $145 million in higher grain costs for the quarter, partially offset by 8.4% higher sales revenue from a year ago. Tyson’s chicken sales totaled $4.43 billion. Volumes rose 6.4%, and prices ticked up 2% from the year-ago period. King said the chicken segment would be the first one to turn around ahead of beef and pork.

The prepared foods segment was the bright spot in the dismal report. The diverse prepared foods business had an operating income of $241 million in the quarter, down from $263 million a year ago. The segment produced an operating margin of 10% in the quarter, down slightly from 11% a year ago. Sales totaled $634 million, up 12.2% year over year. Tyson said this business is poised to see its operating margin between 8% and 10%.

“Through our growth strategy, focus on margin improvement, and proven leadership team, I am confident in our ability to capture the opportunities in front of us and create long-term value for customers, team members, and shareholders,” King noted in his prepared remarks.

Ben Bienvenu, an analyst with Stephens Inc., said the earnings miss signals the depths of this cycle across multiple meats is much weaker than previously expected.

Tyson’s earnings for fiscal 2023 are between $1 and $2 per share, slashed in half from the $4 range that was forecast last quarter. Bienvenu said the earnings are likely approaching a trough but Stephens still thinks the stock could be interesting for longer-term investors while the near-term remains challenging.

Shares of Tyson Foods (NYSE: TSN) tumbled Monday on the weaker-than-expected financial performance. Trading around $51.28 in the morning session, down more than 15.5%, the shares traded to a 52-week low. Volume by 11 a.m. was 8.983 million shares traded, four times more than average daily volume of 2.89 million shares. The one-year high for the stock was $94.77 reached in late April 2022.