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What Benefited Tyson Foods’ Performance in 2Q16?

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Earnings rose 43%

Before we dive into Tyson Foods (TSN) estimates and projections for 3Q16, let’s do a quick recap of its performance in fiscal 2Q16. Tyson reported its financial results for fiscal 2Q16 on May 9. Earnings continued the positive growth trend in the second quarter as well. The adjusted EPS (earnings per share) was ~$1.07 for the quarter—an increase of 43% YoY (year-over-year). Earnings also exceeded estimates by 11%.

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Tyson Foods’ revenue declined

Tyson Foods reported total revenue of $9.2 billion in the quarter—a decrease of 8% compared to the same quarter last year. However, sales beat analysts’ estimate of $9.0 billion. The drop in revenue was due to continued declines in beef, pork, and chicken prices.

Tyson earns its revenue through its four main segments—Chicken, Beef, Pork, and Prepared Foods. The Beef and Chicken segments contributed the most to total net sales in the second quarter. The Chicken segment contributed the most to the total operating profit.

Improved margins

Tyson Foods had improved margins in fiscal 2Q16. The gross, net, and operating margins of 12.9%, 4.7%, and 7.6%, respectively, were ahead of analysts’ expectations. The company reported an operating profit of $704 million—an increase of 27%. The gross profit also increased by $194 million in fiscal 2Q16. Tyson Foods’ segmental operating margins for the second quarter were either in or above normalized ranges. The Prepared Foods and Pork segments saw operating margins of 10.9% and 11.8%, while the Chicken segment’s operating margin was 12.7%.

Peers’ revenues

Tyson Foods’ peers in the industry include Campbell Soup (CPB), B&G Foods (BGS), and Flowers Foods (FLO). Campbell Soup and Flowers Foods’ revenues fell by 1% and 2% in their last respective quarters. B&G Foods’ revenue grew by 63% in its last reported quarter.

The PowerShares DWA Consumer Staples Momentum Portfolio (PSL) and the PowerShares Dynamic Food & Beverage Portfolio (PBJ) invest 4.4% and 2.9% of their respective portfolios in Tyson.

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