A month has gone by since the last earnings report for Tyson Foods (NYSE:TSN). Shares have lost about 0.4% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Tyson due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Tyson Foods Q4 Earnings Miss Estimates, Sales up Y/Y
Tyson Foods posted fourth-quarter fiscal 2019 results, wherein adjusted earnings were $1.21 per share, missing the Zacks Consensus Estimate of $1.23. Moreover, the bottom line declined nearly 23% year over year.
Net sales increased 8.8% to $10,884 million. However, the top line missed the Zacks Consensus Estimate of $11,104 million.
Gross profit for the fiscal fourth quarter came in at $1,139 million, down 14.9% from the prior-year quarter’s figure. Gross margin contracted 290 basis points (bps) to 10.5%.
Tyson Foods' adjusted operating income dipped nearly 16.5% to $686 million. Also, adjusted operating margin for the period was 6.3%, down 190 bps year over year.
Segment Details
Beef: Sales in the segment dipped 1.3% to $3,861 million. Sales volume contracted 4.2% year over year due to lower live cattle processing capacity stemming from the closure of a production facility due to fire. Average sales price rose 2.8% on robust demand for beef products. Adjusted operating income improved almost 17% to $407 million and adjusted operating margin expanded 160 bps to 10.5% during the quarter.
Pork: Sales in the segment increased 10.9% year over year to $1,258 million. Sales volume increased 2.9% year over year, owing to higher domestic availability of hogs and improved demand. Average sales price improved 8.1% year over year on higher livestock costs. Adjusted operating income in the segment amounted to $27 million, down 64.5% from the prior-year quarter’s figure. Adjusted operating margin fell 460 bps to 2.1%.
Chicken: Sales in the segment rose 10.6% to $3,447 million. Sales volume increased 13.1% year over year owing to incremental volume stemming from acquisitions. Average sales price in the quarter declined 2.4% owing to unfavorable sales mix and market conditions. Adjusted operating income declined 47.8% to $95 million while adjusted operating margin contracted 300 bps to 2.8% during the quarter.
Prepared Foods: Sales in the segment improved 2.7% to $2,153 million. Prepared Foods’ sales volume contracted 2.6% thanks to business divestitures. Average sales price increased 5.2% owing to favorable product mix and pricing increases. Adjusted operating income declined nearly 34% to $149 million in the quarter. Adjusted operating margin contracted 390 bps to 6.9%.
International/Other: Sales in the segment were $513 million, up from $60 million reported in the prior-year quarter. Sales volume and average selling price improved remarkably.
Other Financial Updates
Tyson Foods exited the quarter with cash and cash equivalents of $484 million, long-term debt of $9,830 million and shareholders’ equity of $14,226 million.
In fiscal 2019, the company generated cash from operating activities of $2,513 million. Further, management projects capital expenditure to be approximately $1.3 billion for fiscal 2020.
Growth Efforts on Track
Tyson Foods is on track with efforts to boost business through innovations as well as investments in technology and infrastructure. Moreover, it expects demand for protein to rise consistently and is well positioned to exploit all opportunities in the space. For fiscal 2020, USDA expects overall domestic protein production (chicken, beef, pork and turkey) to rise 2-3% year over year. A greater portion of the upside is likely to be absorbed by export markets.
Additionally, the company expects to either meet or exceed high single-digit adjusted earnings growth in the long run.
How Have Estimates Been Moving Since Then?
Fresh estimates followed a downward path over the past two months.
VGM Scores
Currently, Tyson has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Tyson has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Tyson Foods, Inc. (TSN): Free Stock Analysis Report
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