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Tyson Stock Fell 5.4%, Weak Pricing Hurt Its Sales and Outlook

Amit Singh - Author
By

Nov. 14 2018, Published 8:03 a.m. ET

Tyson’s fourth-quarter results

On November 13, Tyson Foods (TSN) reported mixed fourth-quarter results for the period ending on September 29. Tyson’s top line fell short of analysts’ estimate and declined 1.4% on a YoY (year-over-year) basis, which reflected lower average pricing. However, the adjusted earnings grew and beat the consensus estimate. The company lowered its 2019 sales outlook by $1 billion due to pricing pressure. Tyson’s adjusted earnings are expected to remain lower than its adjusted earnings in 2018. Tyson shares decreased 5.4% following its fourth-quarter results and soft sales and earnings guidance.

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Tyson Foods reported an adjusted EPS of $1.58, which exceeded analysts’ expectation of $1.35 and rose 10.5% YoY. The decline in the effective tax rate contributed $0.20 to the fourth-quarter EPS. Higher margins in the Beef segment supported the bottom line. However, higher freight costs and lower average pricing remained a drag.

In 2018, Tyson Foods reported an adjusted EPS of $6.16—up 16.0% on a YoY basis. The lower effective tax rate contributed $0.78 to the EPS in 2018.

Tyson’s management expects lower average pricing and higher freight costs to have a negative impact on its bottom line in 2019. The company’s EPS is expected to be $5.75–$6.10 in 2019—compared to its adjusted earnings of $6.16 in 2018.

Stock performance

Tyson stock has fallen 28.2% YTD (year-to-date) as of November 13, which reflects the negative impact from the demand-supply imbalance, trade war concerns, and lower export prices. Other major food stocks including General Mills (GIS), Kraft Heinz (KHC), and Campbell Soup (CPB) have also marked a double-digit decline in 2018.

In comparison, the S&P 500 Index has risen 1.8% YTD.

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