Tyson Foods Earnings and Outlook Are All About Pork

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Tyson Foods Inc. (NYSE: TSN) reported third-quarter fiscal 2018 results before markets opened Monday. The food processing company posted adjusted earnings per share (EPS) of $1.47 on revenues of $10.89 billion. In the same period a year ago, the company reported EPS of $1.50 on revenues of $10.05 billion. Third-quarter results also compare to consensus estimates for EPS of $1.41 and $11.05 billion in revenues.

In June, Tyson announced a new brand, Raised & Rooted, a meat-alternative and the brand’s first product, Nuggets, based on pea protein, egg whites, golden flaxseed and bamboo. It may be late to the party that features Beyond Meat and Impossible Burger, but the company is the country’s largest meat producer and cannot afford to let a big trend pass it by. Earlier this year, Tyson sold its stake in Beyond Meat following Tyson’s February announcement that it would launch competitive products. Tyson had acquired a 5% stake in Beyond Meat in October 2016 through its venture capital arm, Tyson New Ventures.

In its outlook for the full fiscal year, Tyson said it expects total sales of around $43 billion (analysts have estimated $42.89 billion) in 2019 and $45 billion to $46 billion in fiscal 2020 (analysts’ estimate is $45.2 billion). The company maintained its EPS guidance for this fiscal year at $5.75 to $6.10.

The company expects its beef segment’s adjusted operating margin to be approximately 7% in fiscal 2019, with similar or better results in fiscal 2020. The pork segment’s adjusted operating margin should exceed 6% this year, with similar or better results next year. Adjusted operating margin in the chicken segment is forecast to be around 6% in 2019 and similar or better in 2020. The outlook for the prepared foods segment’s calls for adjusted operating margin near 12% in this year, with similar or better results next.

Analysts have estimated 2019 EPS at $5.89, rising to $6.75 in 2020. For the fourth quarter, analysts expect EPS of $1.67, up from $1.58 a year ago.

Tyson President and CEO Noel White commented:

The African Swine Fever outbreak [in China] continues to take its toll on hog supplies in Asia; however, we have not yet experienced significant benefits to our Pork, Chicken or Beef segments. Given the magnitude of the losses in China’s hog and pork supplies, the impending impact on global protein supply and demand fundamentals is likely to be a multi-year event.

Pork segment volume rose in the third quarter, but the sales price was lower due to an abundance of pork and the company expects hog supplies to rise by 2% to 3% next year, with a concomitant rise in livestock costs. Pricing will be key for Tyson.

Shares traded up about 2.4% in Monday’s premarket session to $81.75, in a 52-week range of $49.77 to $84.30. The stock closed at $79.76 on Friday. The consensus 12-month price target was $88.46 before this morning’s report.

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