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Tyson Foods Reports Mixed Third Fiscal Quarter Results

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Aug. 7 2018, Published 12:10 p.m. ET

Stock rose on earnings beat

Tyson Foods (TSN) reported mixed third fiscal quarter (period ending June 30) results on August 6. The company’s top line marked a YoY (year-over-year) improvement but fell short of analysts’ consensus estimate. However, Tyson Foods’ adjusted EPS had stellar growth and surpassed the consensus estimate. Tyson Foods stock rose 3.3% following its strong performance on the earnings front.

Tyson Foods reported an adjusted EPS of $1.50, which exceeded analysts’ expectation of $1.40 and rose 17.2% YoY.  The decline in the effective tax rate and strong profit margins in the Beef and Prepared Foods segments drove the third fiscal quarter EPS.

However, margin compression in the Pork and Chicken segments remained a drag. The demand-supply imbalance amid uncertainty around exports due to tariffs is impacting pork’s volumes and pricing.

The demand for chicken moderated as the prices of alternatives like pork and beef remained low. Higher freight and feed ingredient costs pressured the Chicken segment’s margins.

Besides Tyson Foods, J.M. Smucker (SJM), Campbell Soup (CPB), and Kraft Heinz (KHC) are also expected to take a hit on the financials due to retaliatory tariffs imposed by Canada, the European Union, and Mexico.

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Outlook

Earlier, Tyson Foods lowered its guidance for fiscal 2018. The company expects its adjusted EPS to be $5.70–$6.00—down from the previous guidance of $6.55–$6.70. Tariffs are expected to impact the pricing and exports. The lower pricing of beef and pork, the demand-supply imbalance in the Pork segment, and soft demand for chicken will likely hurt the company’s bottom-line growth rate. Higher freight and feed ingredient costs are expected to remain a drag.

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