Tyson Foods investors will continue to see weaker earnings into next year as the Springdale-based meat giant predicts only marginal recovery through the fourth quarter ending Sept. 30 into its fiscal year 2024. The company is also closing two more plants.
When Tyson reports earnings on Tuesday (Nov. 13), equity analysts expect sharp declines in net income with flat revenue in the fourth quarter and much the same for the fiscal year.
Consensus fourth-quarter expectations peg net income at $107 million, or 28 cents a share, down 81% from the year-ago period, with revenue of $13.875 billion, up 0.87%. Fiscal 2023 net income is forecast at $448.9 million, down 85% from the $3.168 billion reported a year ago, with earnings per share plummeting from $8.73 to $1.27 on revenue of $53.3 billion, up just 20% from a year ago.
Stephens Inc. analyst Ben Bienvenu recently raised his estimates for the quarter to 30 cents per share, saying he expects Tyson will beat the consensus with improvements in chicken and pork businesses setting up better results in the next fiscal year. He does expect continued challenges with Tyson’s beef segment from higher live cattle costs as the herd remains in a rebuilding phase. He said live cattle prices have risen 29%, but packers have only been able to pass along 24% of those costs to customers.
Tyson Foods CEO Donnie King has said the chicken business challenges have been as dire as he’s seen in his more than 30 years in the business. He said the chicken turnaround is underway.
Chicken processor margins went positive to 6 cents per pound in September, reversing an 11-month negative margin trend back to October 2022. Tyson Foods’ margins are typically much better than the commodity average given much of their products are pre-cooked, deboned or have other enhancements that add value at retail. Bienvenu expects Tyson’s operating margin in chicken to be 0.5% for the quarter and 0.8% for the year, well behind the 7.3% and 5.5% margins reported a year ago. He expects Tyson’s chicken margin to improve to 1.5% in the first quarter and 3.5% to 5% through fiscal 2024.
Tyson’s fourth-quarter chicken segment is expected to report an operating profit of $21.4 million, down 93.7% from a year ago. Chicken sales revenue for the quarter is forecast at $4.296 billion, down 7.4%. For the fiscal year, Tyson is expected to report an operating loss of $130.6 million in its chicken segment, down 114.1% from the prior year.
Tyson has closed 6 poultry plants this year to improve operating efficiency and much of the loss relates to one-time costs associated with the closures.
For all the trouble Tyson has had in its chicken business, the woes are just as bad in the beef segment. Beef packer margins have been lower year-over-year while still positive on the whole. During the quarter, the average packer margin was $167.45 per head, down 46.4% year over year. The margins are also well below historical levels due to increased cattle costs, up 29% from a year ago against the packer cut-out values, up 1% year-over-year.
Tyson’s beef segment operating margin was negative 1% for the quarter and is forecast at 0.9% for the year. Slaughter numbers were down 6% in the quarter compared to a year ago, as softer demand and weaker margins have curtailed production.
Tyson also confirmed Thursday (Nov. 9) that it plans to close two of its case-ready plants operated by the Fresh Meats division by Jan. 8. The plants are in Jacksonville, Fla., and Columbia, S.C., and each employ about 200 workers. Case-ready plants cut and package meat sent from other facilities. Tyson has said these closures are part of its plan to optimize its footprint and describe the situation as “a difficult decision.”
“We understand the impact of this decision on our team members. We will make every effort to offer them opportunities to remain with the company at other locations and will partner with state and local officials to provide additional resources. With a focus on optimizing our operational footprint, we are reallocating resources to operate as efficiently as possible while maintaining ample capacity to serve our customers,” Tyson Foods’ corporate spokesperson stated in an email to Talk Business & Politics.
Tyson Foods is expected to report an operating loss of $48.6 million in its beef business for the quarter, down 112.4%. Sales for the quarter are expected to be $4.857 billion, flat to a year ago. For the year, the beef segment operating income is expected to be $167.4 million, down 93% from 2022. Annual beef sales are forecast at $19.155 billion, down 3.5%.
Tyson’s pork business is seeing improvements behind better industry fundamentals as packer margins were up nearly 40% the quarter and 79.6% better than a year ago. Tyson’s pork segment is expected to report operating income of $8.8 million, down 117% from a year ago for the quarter. For the year, the pork segment will report a net loss of $111.2 million, from 156% from a year ago. The segment’s operating margin for the quarter is forecast at 0.5%, improving from the negative 1.8% margin for the whole year.
Pork segment sales are forecast at $1.764 billion for the quarter, up 10%. Annual pork sales are expected to be $6.038 billion, down 5.9% from the prior year.
Tyson’s large prepared foods business is expected to report operating income of $242.3 million for the quarter, up 64.8%. For the year, the segment’s operating income is projected at $980.3 million, up 25.4% from 2022. The segment’s operating margin for the quarter was expected to be a solid 9%, improving to 9.8% for the full year.
Sales revenue for prepared foods is forecast to have been $2.692 billion for the quarter, up 7%. For fiscal 2023 sales revenue is expected to be $10.035 billion, a gain of 3.6% from last year.
Tyson’s international business has seen some improvement behind major investments over the two years. The segment’s operating income is expected to have been $17.2 million for the quarter, up from losses of $2 million a year ago. For fiscal 2033, the segment’s operating income is expected to be $32 million, up 89.6% from a year ago.
Quarterly sales revenue for the international business is expected at $689 million, up 8%. For the year, sales revenue is forecast at $2.568 billion, up 9%. The segment’s operating margin was forecast at 2.5% for the quarter and 1.3% for the full year.