Tyson Foods Chickens Came Home to Roost as Operating Margins Contract

Tyson Foods is a stock known for not missing earnings, in the Q3 (June), quarter it did. Adjusted operating margins tell the story as they contracted by 340 bps yr/yr to 7.4%. While consumer prices for beef, chicken, and pork boosted revenue the input costs more than offset the pricing benefits. TSN adjusted their prices given their products have a degree of price elasticity. TSN did reaffirm its FY22 revenue guidance of $52-54 billion as well as its adjusted operating margin forecast of 11-13%.

Earnings

  • TSN’s adjusted EPS fell 28% yr/yr to $1.94
  • Revenue rose 8.2% lift to $13.49 bln, easily surpassing analyst estimates.

Highlights

  • International sales gained 23.4% yr/yr to $602 mln,
  • Chicken sales jumped 25.6% yr/yr to $4.37 bln
  • Beef sales grew just 0.1% to $4.96 bln,
  • pork sales 5.6% to $1.62 bln.
  • Prepared Foods sales grew a modest 5.4% to $2.45 bln.
  • TSN’s productivity program delivering at the upper range of initial projections. TSN noted that it is on track to realize over $1.0 bln in recurring productivity savings by the end of FY24.

The Chicken impacts

Chicken sales jumped 25.6% yr/yr to $4.37 bln, boosted by a 20.1% hike in average prices. Similarly, Prepared Foods’ average price climbed by 13.8%. This led to a 1.9% drop in total volumes, driven mainly through chicken and pork volumes falling by 2.1% and 1.7%, respectively, yr/yr.

Pork’s volume decline was largely due to soft international sales marked by a strengthening U.S. dollar, while chicken’s slight decline was affordability impacts from soaring prices.

Higher prices were also the driver behind an 8.5% dip in volumes of Prepared Foods, which is comprised of frozen and refrigerated products for retail customers. TSN also divested its Pet Treats business last year.

Outlook

TSN’s reaffirmed FY22 revenue guidance stems mostly from higher-than-expected price inflation as the company expects total volume growth to be flat yr/yr. Concerns are that consumers have begun reducing their premium beef purchases due to widespread inflation.

From the TradersCommunity News Desk