Investing

Tyson Foods Earnings Preview: Who's Watching the Henhouse?

The three major U.S. equity indexes closed lower Wednesday. The Dow Jones industrials ended the day down 1.95%, the S&P 500 closed 2.08% lower, and the Nasdaq was off 2.48%. All 11 sectors closed lower, with energy (4.88%) and consumer cyclicals (3.12%) posting the biggest losses. Utilities (0.84%) closed with the smallest loss.

The monthly report on the consumer price index (CPI) came in with better-than-expected news. Economists were expecting CPI to increase month over month in October by 0.7% and core CPI (excluding food and energy) to come in at 0.5%. CPI was level with the prior month with an increase of 0.4%, and core CPI rose by just 0.3%. The weekly report on new claims for jobless benefits rose from an upwardly revised total of 218,000 in the prior week to 225,000. Continuing claims for benefits also rose slightly, from an upwardly revised 1.487 million to 1.493 million.

The three major indexes traded higher in Thursday’s premarket session. The inflation and unemployment numbers unleashed some serious early morning buying.

After U.S. markets closed Wednesday, Wynn Resorts posted a larger-than-expected per-share loss while managing to beat the revenue estimate by about 2.5%. Shares traded up nearly 5% Wednesday morning.

Unity Software beat the consensus per-share loss estimate by a penny but missed the consensus revenue estimate. The stock also traded up by nearly 10%.

Kinross Gold reported misses on both top-line and bottom-line estimates. Shares traded up by about 3.4% in Thursday’s premarket.

Before markets opened Thursday morning, AstraZeneca beat the consensus earnings per share (EPS) estimate by more than 10% and also reported better-than-expected revenue. Shares traded up about 7.7%.

Nio posted a big miss on analysts’ consensus loss per share but beat the revenue estimate slightly. The China-based EV maker issued fourth-quarter revenue guidance that was well below the consensus estimate. Fourth-quarter deliveries were forecast at 43,000 to 48,000 vehicles, up about 72% to 92% year over year. Nio stock traded up more than 10%.

WeWork reported a worse-than-expected loss per share and lower-than-expected revenue. The office space rental firm also guided fourth-quarter revenue below the consensus estimate. Shares traded up 7%.

Aurora Cannabis and Toast are reporting quarterly results after markets close. There are no notable earnings releases scheduled for Friday. Tyson Foods Inc. (NYSE: TSN) is on deck to report earnings before U.S. markets open on Monday.

Shares of the global supplier of beef, chicken, pork and prepared foods have dropped more than 22% from their value over the past 12 months. For 2022 to date, they are down more than 26%.

Last weekend, the company’s CFO, John Tyson, was arrested on charges of public intoxication and criminal trespass. A scion of the family that controls the company, Tyson was named to the position in September and is the youngest chief financial officer at an S&P 500 company. The arrest calls into question how the company is being run and what it plans to do to restore investor confidence in the firm. Investors are going to expect some answers Monday morning.

Of 14 analysts covering the stock, five have ratings of Buy or Strong Buy and eight have Hold ratings. At a recent price of around $64.10 a share, the implied gain based on a median price target of $89.50 is nearly 40%. At the high price target of $105.00, the implied gain is 63.8%.

For Tyson’s fourth quarter of fiscal 2022, analysts expect revenue of $13.49 billion, flat sequentially but up 5.3% year over year. Adjusted EPS are forecast at $1.72, down 11.5% sequentially and by 25.2% year over year. For the full fiscal year, Tyson is expected to report EPS of $8.78, up 6.1%, on sales of $52.89 billion, up 12.4%.

Tyson stock trades at 7.3 times expected 2022 EPS, 8.8 times estimated 2023 earnings of $7.28 and 8.4 times estimated 2024 earnings of $7.67 per share. The stock’s 52-week trading range is $62.94 to $100.72. The company pays an annual dividend of $1.84 (yield of 2.87%). The total shareholder return over the past year was negative 20.6%.

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