Categories Analysis, Earnings, Retail

Preview: Chicken to eat into Tyson Foods Q1 earnings results

Meat manufacturer Tyson Foods Inc. (TSN) is scheduled to report its first-quarter earnings on Thursday before the bell. The demand for pork and beef is likely to rise while the chicken segment will face headwinds due to contamination recall. The top line could rise on pork and beef demand while the bottom line would be hurt by higher costs and expenses.

Analysts expect Tyson Foods to post earnings of $1.57 per share on revenue of $10.37 billion for the first quarter. In comparison, during the previous year quarter, the company reported a profit of $1.81 per share on revenue of $10.23 billion. Majority of the analysts recommended a “strong buy” or “buy” rating while expecting the stock to reach 69.80 per share for the next 52 weeks.

The strong sales from Beef and Prepared Foods segments could be driving the top line results while oversupply and pricing headwinds remained a major concern. The Chicken and Pork segments would face stiff headwinds as possible rubber contamination increased the recall of chicken nuggets.

For the first quarter, the growth of Beef and Prepared Foods segment would be driven by the rising demand for protein-rich products. The demand for fresh and organic food options would rise due to increasing health consciousness. However, the company’s bottom line would be hurt by the struggle to combat excess supplies and higher freight costs.

Picture Courtesy: Tyson Foods

For the fourth quarter, earnings jumped 36% on strong sales from Beef and Chicken. Beef sales volume rose 3.4% on improved availability of cattle supply, stronger demand for its beef products and increased exports. Pork sales volume declined 2.7% due to balancing supply with customer demand during a period of margin compression. Chicken sales volume jumped 10.4% on incremental volume from business acquisitions.

Also read: Tyson Foods fourth quarter 2018 earnings conference call transcript

For the full year 2019, Tyson Foods had expected sales to grow to $41 billion due to volume growth and mix. Most of the sales growth is expected to occur in its Chicken segment, as well as expected growth in its Prepared Foods segment after excluding the impact of the divestitures. Adjusted earnings are anticipated to be $5.75 to $6.10 per share.

Capital expenditures were projected to be about $1.5 billion for fiscal 2019 and net interest expense was predicted to be about $350 million. In fiscal 2019, the company has expected industry fed cattle supplies growth in Beef of about 2%, and industry hog supplies growth in Pork of about 3%.

Shares of Tyson Foods opened higher on Tuesday but is currently fluctuating between the green and red. The stock has fallen over 17% in the past year while it has risen over 11% in the past month.


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