Tyson Foods expected to see 300% net income gain in third fiscal quarter

All eyes will be on Tyson Foods on Aug. 5 as analysts expect a big quarter thanks to improved operating metrics in chicken and pork. Tyson is expected to post third-quarter earnings per share of 61 cents, up 306% over the year-ago period ending June 30.

Estimated net income will be $217 million in the fiscal quarter, up from a net loss of $417 million a year ago when Tyson incurred one-time charges of $448 million. Fiscal third-quarter revenue is forecast at $13.21 billion, down slightly from the $13.41 billion recorded a year ago.

Chicken could be a bright spot with positive operating income despite flat sales revenue pegged at $4.21 billion. Analysts said Tyson is expected to benefit from 30% lower grain costs, and increased consumer demand for chicken and lower-priced meats than beef. The poultry industry also benefits from the lowest freezer inventory levels in several years, according to U.S. Department of Agriculture (USDA) data.

Stephens Inc. reports the chicken processing margin for the industry averaged 32 cents per pound for the quarter ending June 30, much better than the 6-cent loss per pound a year ago. Margins are also well above the 5-year average of 20.3 cents per pound, according to analysts with Little Rock-based Stephens.

Tyson Foods is expected to report slightly higher processing margins because much of its chicken business carries a further processing premium for boneless, skinless, or marinated cuts, Stephens reports. Rabobank analysts noted the poultry industry is in a good position and that will be key to Tyson Foods’ improved earnings.

The largest segment for Tyson Foods is beef and that segment is dealing with higher live cattle costs because of lower herd numbers. USDA said live cattle costs rose 7% in the quarter compared to the same time last year. Beef production remains flat to a year ago. Tyson is expected to report another operating loss in the beef segment, marking the third consecutive quarter for the deficit.

Beef sales are expected at $4.76 billion, down 3.9% year over year. Stephens reports the beef processing margin for the industry averaged $71.33 per head for the quarter. Margins are down 68.4% from the year-ago period. Compared to the five-year average of $503 per head, margins are down 85.8%.

Production is up about 5% from a year ago and flat to the five-year average. Live cattle prices peaked above $190 per hundredweight in July. During Tyson’s third quarter, prices averaged $185 per hundredweight, according to Stephens’ data. Wholesale choice boxed beef prices improved to roughly $300 per hundredweight. Choice boxed beef is the average price paid to processors by retailers.

The company is experiencing solid demand for red meat from consumers, according to Rikki Ingram, director of beef and pork marketing for Tyson Foods. Ingram noted in the recent Supermarket Perimeter Report 2024 that Tyson is seeing higher demand for alternative cuts like top sirloin, flat iron and ranch steaks.

The smaller pork business at Tyson is expected to report sales totaling $1.42 billion, up 7.5% from a year ago. The segment’s operating income will benefit from an improving pork processing margin average of $21.90 per head for the quarter, up from $17.19 a year ago. Production is up about 5% from a year ago because of better margins and lower inventories in cold storage. Wholesale pork prices are around $95 per hundredweight for the quarter, up from around $80 a year ago.

Tyson’s prepared foods segment is expected to report sales of $2.64 billion, up 3% year over year. The segment should improve because of overall stronger prices and demand for Tyson’s multiple protein offerings from the deli case to the freezer and fresh meat sold to retail. Tyson’s international segment is also expected to see revenue of $657 million, up 6.2% for the quarter.

The share price of Tyson Foods (NYSE: TSN) is up 13.3% this calendar year. The stock closed July 31 at $60.90, down 1 cent. Over the past 52 weeks the share price has ranged between $44.94 and $62.04.