Tyson Foods posts quarterly gains in net income, revenue (Updated)

Tyson Foods on Monday (Aug. 5) reported fiscal third-quarter net income of $191 million, a wide swing from a $417 million loss in the same quarter of 2023. Revenue was $13.353 billion, up 1.6% from the 2023 quarter and above the consensus estimate of $13.24 billion.

Earnings per share for the Springdale-based global company was 54 cents, and adjusted earnings per share was 87 cents. The consensus estimate was 65 cents.

“Our disciplined actions and focus on the fundamentals have resulted in a positive turnaround of our business,” Tyson Foods President and CEO Donnie King noted in the earnings report. “In Q3, we delivered the highest adjusted operating income in the last seven quarters while also generating strong free cash flow. Looking ahead, we will continue to strive to be best-in-class operators, drive efficiencies, value-up our portfolio, win with customers and consumers, and be disciplined in our capital deployment.”

Net income in the first nine months of the fiscal year was $443 million, much better than the $198 million loss in the same period in the previous fiscal year. Revenue in the first nine months was $39.744 billion, ahead of the $39.533 billion in the same period of the previous fiscal year.

BIG CHICKEN
The biggest key to Tyson’s turnaround was the chicken segment. Tyson’s improved profitability was helped by lower grain costs, better hatch rates and live chicken mortality results, and improved consumer demand. Also, more production restraint by the poultry industry has kept chicken supplies more in line with demand compared to the excess supply on the market a year ago.

Tyson reported chicken sales of $4.076 billion in the quarter, with volumes down 0.4% and prices down 3.7%. Operating income totaled $244 million in the quarter, a stark improvement over the $314 million operating loss reported a year ago.

Tyson said there is still some upside potential in its chicken segment as it raised the segment’s adjusted operating income forecast to range between $850 million to $950 million for fiscal 2024. Guidance increased from $700 million to $900 million previously forecast.

RED MEAT
Tyson Fresh Meats business, which consists of beef and pork, performed less favorably than chicken in the quarter. The beef segment continues to struggle with lower live cattle supplies resulting in high prices paid by packers like Tyson Foods.

Tyson beef reported a beef segment operating loss of $69 million in the quarter, down from a $66 million gain a year ago. Beef sales improved 4.4% to $5.241 billion due to higher carcass weights that pushed slaughter volumes up 4.4%. Prices were up 1.4% over a year ago.

The company does expect improvement in the beef segment for the balance of this yea and projects an operating loss between $300 million and $400 million for fiscal 2024.

The smaller pork segment reported net sales of $1.462 billion thanks to 12.6% higher prices and a 1.2% more volume sold. The pork segment posted an operating loss of $62 million, down from a $74 million lost a year ago. After a one-time $45 million legal contingency adjustment, the segment posted a $22 million operating income gain.

Tyson said it expects adjusted operating income of $100 million to $200 million in fiscal 2024 as U.S. hog production is expected to increase 3% year over year.

PREPARED FOOD, INTERNATIONAL
Tyson’s diversified prepared foods segment, which includes the company’s foodservice business, reported revenue of $2.43 billion, up 2% on volume with prices flat compared to a year ago. Tyson said food service demand is improving amid wider promotional pricing from quick-service chains.

Operating income totaled $203 million, down from $206 million a year ago. Tyson anticipates the segment to report adjusted operating income between $850 million and $950 million for fiscal 2024.

Tyson’s international business is also improving. The segment’s revenue totaled $582 million. Volumes were up 6.5%, but sales prices were down 14.6%. Operating income improved to $25 million, reversing a $234 million loss a year ago as many of the newer plants in Asia were just coming online.

Tyson also announced that Devin Cole, who recently returned to the company to oversee its business with McDonald’s, will to take over the international segment as Amy Tu, who has led the business for the past two years, leaves the company. Tu joined Tyson Foods in December 2017 as general counsel and corporate secretary. She was promoted to chief legal officer in 2021 and moved to lead the international business when Stewart Glendinning exited the company in October 2022.

Tyson expects adjusted overall operating income between $1.6 billion to $1.8 billion for fiscal 2024 with revenue flat from a year ago. Tyson also has reduced capital expenditures by $100 million for the year. Cash flow is expected to continue its growth as it totals $1.973 million year-to-date in 2024. Cash flow improvements have reduced Tyson’s leverage ratio year over year, helping the company’s overall financial health.

Analysts remain split on Tyson Foods with 11 of 16 polled by FactSet ranking the stock a buy. The other five analysts are neutral on the stock. On July 10, Bryan Spillane, an analyst with Bank of America, lowered his price target by 3.2% to $60 and maintained his neutral rating. He cited softening sales, boycott concerns in the Middle East and continuing weakness in China for his pullback. Stephens Inc. remains bullish on Tyson Foods with a high one-year target price of $72 per share.

Shares of Tyson Foods (NYSE: TSN) traded higher on Monday’s earnings report. At mid-day shares were up nearly 3% to $62.88. The price is up 17% over since January, and in the past 52 weeks the share price has traded between $44.94 and $63.87 – an intra-day high the stock hit Monday.