Tyson Foods expected to post a 34% gain in net income

Tyson Foods may report a 34% net income boost when the company reports second quarter earnings on May 5. Market watchers predict quarterly net income of $296 million, better than the $220 million in the same period of 2024.

Revenue is forecast at $13.123 billion for the Springdale-based global meat company, up 0.5% from a year ago.

Stephens Inc. expects Tyson to outperform the market consensus, earning 85 cents per share, noting chicken profitability is better than expected. But the beef segment is likely to be a drag on overall results. Stephens analyst Pooran Sharma said there have been no signs of heifer retention and he expects pressure over the near to intermediate term for meat packers as beef margins continue to struggle.

Chicken margins averaged 26 cents a pound in the quarter, 16 cents higher than the year-ago period. Margins have benefited from strong demand and flat feed costs. The U.S. Department of Agriculture (USDA) weekly slaughter data points to chicken pounds produced being up 3.2% compared to the same period last year. Chick placements and eggs in incubators are also up between 2.3% and 2.4% from a year ago. The chicken business also benefits from increased retail and foodservice demand because of rising beef prices.

Tyson may also benefit from rising chicken prices. Wholesale chicken breast meat prices rose 40% in the quarter from a year ago to almost $2.70 per pound. Leg-quarter prices were up 14.6%,  and wing prices were down 7.8% from a year ago.

Tyson’s chicken segment is expected to report sales of $4.035 billion, up 0.7% from a year ago. Operating income is expected to total $282.5 million, up 76.6% year over year. The operating margins are forecast at 7%, up from 3.9% reported a year ago.

Tyson’s prepared foods segment is expected to see improved results with sales totaling $2.428 billion, up 1% year over year. Operating income is expected to rise 9.4% to $254.9 million in the quarter. The operating margin is expected to be 10.5%, up slightly from a year ago.

RED MEAT WOES
Tyson’s beef segment is forecast to have revenue of $5 billion in the quarter, up 1% from a year ago. Net operating income is forecast to decline by $62.5 million, widening the loss of $34 million a year ago. Tyson’s beef operating margin is forecast at at 1.3%. Live cattle prices rose 12.8% in the quarter, and average weekly slaughter was down 2.5% in the quarter. Beef prices – cutout values – are up 8.4% year over year, with higher prices reducing consumer demand.

Analysts expect more commentary from Tyson on beef export concerns amid the ongoing trade war – fueled by tariffs pushed by the Trump Administration – the U.S. has with beef trading partner countries like Canada, Japan, and Mexico.

Tyson’s smaller pork segment is expected to do better than beef, but it still has its challenges. Pork sales are forecast at $1.5 billion for the quarter, up 1%. Operating income is expected to be $18.8 million, down 43% from a year ago. The segment’s operating margin is forecast at 3.6%, down from 4.5% a year ago.

During the quarter, the pork processing margin averaged $20.97 per head, down 33.9% year over year. Production for the pork industry was down for most of the quarter, but slaughter has increased by around 4.7% in recent weeks.

INTERNATIONAL, STOCK RATING
Tyson’s international business is not a major contributor to the company’s bottom line, given its smaller scale. However, with plants in Asia and Europe, Tyson may be at an advantage if the U.S.-induced trade war continues.

Tyson is expected to report international sales of $582.9 million, up 0.5% year over year. The segment’s operating income is expected to be $11.7 million, down 16.7% from a year ago. The segment could have an operating margin of 2%, down from 2.4% a year ago.

The majority of analysts who follow Tyson Foods rank the stock “equal weight” or neutral for the next year given the beef industry weakness.

Sharma at Stephens Inc. has an earnings per share estimate of 85 cents, better than the 83-cent consensus, and he has a target price of $63 for the stock. For the full year, Sharma expects Tyson Foods to earn $3.76 per share, a downward adjustment from the $3.72 he had previously forecast.

The majority of analysts polled by Thomson Reuters rate Tyson Foods “equal weight” compared to just 2 who recommended Tyson as “above weight” or a “buy” position. Barclays has remained bullish on Tyson Foods with a target price of $75 per share in late January. Citigroup, UBS and Piper Sandler each rank Tyson Foods shares “equal weight,” heading into the second quarter earnings report.

Shares of Tyson Foods (NYSE: TSN) closed Tuesday at $60.58. Over the past 52 weeks, the share price has ranged from $53.61 and $66.88.