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Tyson Foods Beats Q3 Earnings Estimates, Stock Jumps

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Part 3
Tyson Foods Beats Q3 Earnings Estimates, Stock Jumps PART 3 OF 5

Analyzing Tyson Foods’ Fiscal 3Q17 Sales Trends

Strong volumes and pricing drove sales

Tyson Foods’ (TSN) fiscal 3Q17 sales of $9.9 billion beat the Wall Street consensus of $9.5 and rose 4.8% YoY (year-over-year), reflecting volume growth across all segments and higher pricing.

In comparison, Pilgrim’s Pride’s (PPC) 2Q17 sales improved 11.0% YoY due to increased demand for chicken. Wall Street analysts project Sanderson Farms (SAFM) to report double-digit growth in its top line for the upcoming quarter. Hormel Foods (HRL) is expected to register a YoY decline in sales.

Analyzing Tyson Foods’ Fiscal 3Q17 Sales Trends

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Segment performance

Tyson Foods’ Beef segment’s sales rose 5.7% to $4.0 billion, reflecting improved volumes and higher average selling prices. Volumes rose 0.4% on account of strong demand in the domestic market and higher exports. Meanwhile, average selling prices rose 5.3% during the quarter as higher demand and increased exports outpaced live cattle supplies. Management expects the Beef segment’s top line to rise in the coming quarters due to the growth in the consumption and availability of livestock.

The company’s Pork segment’s sales came in at $1.3 billion, up about 4.0% YoY due to a 3.3% rise in average prices and 0.6% increase in volumes. The segment continues to see growing demand in the local market coupled with increased exports. Meanwhile, increased consumption led to higher demand, which outpaced the supplies of live hogs, resulting in improved pricing.

The Chicken segment’s net sales rose 4.6% to $2.9 billion in fiscal 3Q17, reflecting a 1.6% rise in volumes and 2.9% growth in pricing. Going forward, management expects demand for chicken products to remain strong and expects higher sales in this segment. Meanwhile, pricing is expected to increase due to a favorable mix. Moreover, the acquisition of AdvancePierre should generate incremental sales in fiscal 2018 for the Chicken segment.

Tyson Foods’ Prepared Foods segment marked YoY growth of 7.5% in its sales to $1.9 billion. Improved results reflect benefits of increased volumes and pricing from the AdvancePierre acquisition. However, softness in the Foodservice category remains a drag. Management expects the Prepared Foods segment to benefit from the AdvancePierre acquisition in fiscal 2018.

Outlook

The company now expects fiscal 2017 sales to be more than $38 billion, driven by improved volumes and higher pricing. For fiscal 2018, sales are projected to be about $41 billion, excluding the impact of the divestiture of non-core businesses.

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