Earnings preview: Higher meat demand could benefit Tyson Foods’ Q3 results

Tyson Foods Inc. (NYSE: TSN) is scheduled to report third quarter 2019 earnings results on Monday, August 5, before market open. Analysts have forecast earnings of $1.43 per share on revenue of $11.05 billion.

The chicken and beef businesses are likely to benefit from higher meat prices as well as strong supply and demand dynamics. This could help cushion the impact to the company from higher feed costs and weak demand in the pork segment. In addition, a reduction in pork supply due to African Swine Fever could benefit Tyson’s chicken, beef and pork businesses.

The Prepared Foods business is a key growth driver for the company and currently generates 30% of its profits. Tyson is seeing strong demand for proteins alongside a growing preference for plant-based protein products. To take advantage of this trend, the company has rolled out its own plant-based and blended products along with its Raised and Rooted brand.

The alternative protein market is estimated to be a multi-billion dollar category in the future and Tyson is looking to grow its footprint in this space.

During the quarter, Tyson completed the acquisition of the Thai and European operations of BRF S.A., which will help the company expand its offerings in the traditional protein market. Around 98% of protein consumption growth is estimated to happen outside the US over the next five years, and approx. 70% of this growth will be in Asia. The acquisitions of Keystone and the BRF assets can be expected to benefit Tyson’s topline numbers in the quarter.

In the second quarter of 2019, Tyson beat market estimates for revenue and earnings. Sales grew 7% to $10.4 billion while adjusted EPS fell 6% to $1.20. For full-year 2019, the company has guided for adjusted EPS of $5.75-6.10.

Tyson’s shares have gained 55% year-to-date and 8% over the past three months. The majority of analysts have rated the stock Buy and the average 12-month price target is $87.

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