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Tyson Foods’ Q1 Results Fail to Impress Investors

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Key takeaways

Tyson Foods (TSN) reported mixed first-quarter results today. Tyson Foods’ top line remained weak and fell short of analysts’ estimate as lower pricing and weak volumes in the beef, pork, and prepared foods segment remained a drag. Tyson Foods’ adjusted earnings came in ahead of the analysts’ estimate. However, first-quarter EPS declined 12.7% on a YoY basis.

The weakness in the bottom line reflected the continued margin compression in the pork segment, higher labor and feed ingredient costs, and lower pricing.

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Management expects to report net sales of $43 billion in fiscal 2019, driven by improved volumes and mix coupled with the incremental sales from its Keystone acquisition. Meanwhile, Tyson Foods reaffirmed its full-year EPS guidance and expects fiscal 2019 adjusted EPS to be in the range of $5.75 to $6.10. The projected EPS range implies a YoY decline of 1% to 7%. Lower average selling prices, compressed margins in the pork segment, and higher labor and freight costs are expected to hurt the company’s fiscal 2019 adjusted EPS.

Tyson Foods announced that it is acquiring the Thai and European operations of BRF S.A. for about $340 million. The acquisition is expected to strengthen its value-added product offerings, which are witnessing healthy demand.

Key numbers

Tyson Foods reported net sales of $10.2 billion, which fell short of analysts’ estimate of $10.4 billion and decreased slightly on a YoY basis. Adjusted operating income fell ~11%, while the adjusted operating margin dropped by 90 basis points.

Adjusted earnings came in at $1.58 per share, a 12.7% decrease on a YoY basis. However, adjusted EPS came in ahead of analysts’ estimate of $1.56.

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