Tyson Foods Shares Rebound Despite Bleak Revenue Forecast

Tyson Foods' Stock

Tyson Foods (NYSE:TSN) faced a drop in its share value after providing a revenue forecast for the next fiscal year that fell below Wall Street estimates. The fourth-quarter sales also failed to meet expectations due to declining chicken and pork prices, coupled with a slowdown in beef demand. Despite the pessimistic revenue forecast, the prominent U.S. meatpacker exceeded expectations for quarterly profits, resulting in a 2% rise in its stock value.

During fiscal 2023, Tyson’s beef, pork, and chicken units encountered challenges arising from either excessively tight or abundant supplies. The strong U.S. dollar constrained beef exports, and American consumers scaled back meat purchases amid rising food prices and interest rates, affecting overall demand. Despite these hurdles, Tyson CEO Donnie King expressed optimism, stating that the company operates more efficiently, and there is still robust demand for protein.

Tyson Foods, adopting cost-control strategies like workforce reductions and facility closures, disclosed enhanced performance during the latter part of fiscal year 2023. There were speculations in August about the company planning to sell its China poultry business, but Chief Financial Officer John R. Tyson emphasized that it is “business as usual” in China. When asked about potential further plant closures in the U.S., he stated, “We continue to evaluate everything.”

The company reported a positive turn with operating margins of 1.8% in its chicken business in the quarter ending Sept. 30, following losses in the previous two quarters. Arun Sundaram, a senior equity analyst at CFRA Research, noted that analysts are encouraged by the sequential improvement, expressing optimism that the protein market may have reached its lowest point a few quarters ago.

In Tyson’s largest unit, the beef business, quarterly sales volumes fell by 6.7%, while prices rose by 10.2%. The company anticipates an adjusted operating loss of between $400 million and breakeven for this unit in fiscal year 2024 due to tight U.S. cattle supplies. Tyson projects flat total sales of $52.88 billion for fiscal 2024, falling short of analysts’ expectations of $54.40 billion, according to LSEG data. Fourth-quarter sales were reported at $13.35 billion, a 2.8% decrease from analysts’ estimates of $13.71 billion, with adjusted profits at 37 cents per share, exceeding analysts’ expectations of 29 cents.

Featured Image: Unsplash

Please See Disclaimer