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What Could Cause Tyson’s Revenue to Fall in Fiscal 2Q16?

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Falling revenue?

Tyson Foods (TSN) is expected to report lower revenue of $9.03 billion in 2Q16. This indicates a YoY (year-over-year) decline of 10%. The export markets are expected to face challenges in 2016. This could hamper the revenue.

Analysts expect the revenue to fall in all of the remaining quarters in 2016. They expect lower revenue in 3Q16 and 4Q16 with growth of 8% and 9%. The fiscal 2016 revenue is expected to be ~$37.24 billion—a fall of 10% YoY.

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Expectations for 2016

Management expects the revenue to be ~$37 billion for fiscal 2016. It includes the impact of fiscal 2015 divestitures and declining beef, pork, and feed prices. Management expects its Prepared Foods segment to benefit the most in 2016. It expects lower raw material costs of ~$250 million in fiscal 2016. Despite the fall in the revenue, Tyson continues to execute its growth strategy in value-added categories. Tyson banks on innovation and marketing to drive growth in the future.

What impacted the revenue in 1Q16?

Tyson’s fiscal 1Q16 revenue was $9.2 billion—a decrease of 15% compared to 1Q15. It was aided by a significant decline in beef, pork, and feed prices. Sales volumes also fell 7% in the quarter. Its revenue suffered due to the deflationary environment of the raw materials and the divestiture of a few non-core businesses. Tyson’s revenue missed estimates by 8.5% in 1Q16.

Peers’ revenue expectations

Tyson’s peers in the meat industry include Hormel Foods (HRL), Pilgrim’s Pride (PPC), and Sanderson Farms (SAFM).

  • Hormel’s revenue is expected to rise by 1% in fiscal 2Q16.
  • Pilgrim’s Pride revenue is projected to grow by 1% in fiscal 2Q16.
  • Sanderson Farms’ revenue is projected to fall by 7% in fiscal 2Q16.

The Guggenheim S&P 500 Equal Weight Consumer Staples ETF (RHS) and the AdvisorShares TrimTabs Float Shrink ETF (TTFS) invest 2.6% and 1.1%, respectively, of their portfolios in Tyson Foods’ stock as of May 5.

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