First-quarter net income expected to fall 55% for Tyson Foods

Tyson Foods may post lower profits when it reports first-quarter earnings on Monday (Feb. 5.) Net income is forecast at $142.094 million, or 40 cents per share, down 55% from the year-ago period, according to a consensus of analyst estimates.

Revenue is projected at $13.36 billion, up less than 1% from the $13.26 billion reported a year ago. While the Springdale-based meat giant continues to face earnings challenges, Stephens Inc. analyst Ben Bienvenu is a little more optimistic for the rest of the year.

“We think chicken fundamentals are positioned to show improvement through this year, with margins headed toward historical average profitability, a welcomed change after a difficult last year. But given the length of the beef cycle, shares are trading at discounted levels. As we move through the next several years we think improving earnings power will increasingly push Tyson Foods shares higher,” Bienvenu noted.

He expects Tyson to report an earnings beat of 42 cents per share because of improvements in chicken along with better-than-expected pork and beef margins despite some ongoing challenges. He pegs revenue at $13.575 billion, which would be an annual gain of 2.37%.

Total operating income is projected at $256 million, down from $453 million in the year-ago period. Most of that loss can be attributed to an estimated $24 million loss in beef for the quarter compared to an operating income of $129 million a year ago. Beef sales are projected at $4.817 billion, up 2% year over year.

The Stephens beef processing margin averaged $134 per head in the quarter, down 10.6% year over year. Packer margins have continued to trend below the historical average as live cattle costs increased during the quarter. Margins slid to $74.53 per head, down 74.9% year over year during the quarter, according to Bienvenu’s report.

Wholesale beef prices are down 16.5% year over year and live cattle prices averaged $282 per hundredweight, up 16.3% and overall slaughter was down 3.6% in the quarter.

Tyson’s chicken business is expected to report income of $87 million for the quarter, up 12.9% from the $77 million reported a year ago, with sales of $4.351 billion, up 2.1%. Chicken processing margins averaged 2 cents per pound in the quarter, 20 cents a pound higher than a year ago but still slightly below the historical average.

Margins improved because of lower feed costs and lower supplies. The industry slaughtered 2.5% fewer birds in the quarter which also led to lower supplies and higher prices. Boneless breast meat prices rose 12% year over year, while tender prices rallied 20.9% from a year ago.

The pork business is expected to have no income for the quarter with revenue of $1.442 billion, down 5% from a year ago. Tyson Foods prepared foods business is expected to see income of $173 million, down from $266 million a year earlier. Segment sales are expected to be $2.664 billion, up 5%. The international business operating income is projected at  $17.6 million, compared to $1 million a year ago. The operating margin for the international business is expected at 2.5% for the quarter.

Analysts are mixed on Tyson Foods with Stephens being bullish with a “buy” rating for long-term investors. BMO Capital takes a similar stance. However, the list of analysts less optimistic includes JP Morgan, Citigroup and Piper Sandler who are each on the sideline with a “neutral” or “hold” rating.