Will Chicken Segment Drive Tyson Foods' (TSN) Q3 Earnings?

Tyson Foods, Inc. (NYSE:TSN) is scheduled to release third-quarter fiscal 2019 results on Aug 5. This renowned meat products company’s earnings have outpaced the Zacks Consensus Estimate, with average of 10.2% in the trailing four quarters.

Let’s see what’s in store for the company this time around.

What to Expect?

The Zacks Consensus Estimate for earnings in the third quarter has remained unchanged in the past 30 days at $1.47, indicating a decline from $1.50 reported in the year-ago quarter. The consensus mark for revenues is $11,108 million, implying an increase of 10.5% from the year-ago quarter’s reported figure.

Factors Likely to Drive Tyson Foods

Tyson Foods is likely to gain from its Chicken and Beef segments, given the rising demand for protein. Notably, the company boasts a rich portfolio of protein-packed brands, the demand for which is growing rapidly across the globe. To this end, the company has also been undertaking acquisitions alongside offloading certain non-protein businesses. In particular, acquisitions are aiding growth in the Chicken segment and are likely to be a key driver in the quarter to be reported. Notably, the company acquired the Keystone Foods business in November 2018, which is expected to keep bolstering its Chicken and Other segments' performance.

Other notable acquisitions of Tyson Foods in the past include AdvancePierre and Original Philly Holdings. Also, the company has acquired poultry rendering and blending assets of AMPRO Products, Inc. and American Proteins, Inc. This has enabled Tyson Foods to bolster animal products recycling capabilities, which will aid in expanding the animal feed business. Apart from this, the company is likely to benefit from its focus on alternative sources for meat and protein products, evident from its investments in Beyond Meat (NASDAQ:BYND) and Memphis Meats.

Hurdles in the Path

Lower sales in the Pork and Prepared Foods categories have been weighing on the company’s top-line performance. While Pork segment sales were hurt by lower average sale price, the performance of the Prepared Foods category has been bearing the brunt of business divestitures. Also, input costs in the Prepared Foods category are expected to rise during the third and fourth quarters of fiscal 2019, owing to higher price of beef and pork stemming from the concerns regarding the outbreak of African swine fever in China. This poses a threat to the bottom line.

What the Zacks Model Unveils

Our proven model doesn’t conclusively predict a beat for Tyson Foods this earnings season. For this to happen, a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Though Tyson Foods carries a Zacks Rank #3, it has an Earnings ESP of 0.00%, which makes surprise prediction difficult.

Stocks Poised to Beat Earnings Estimates

Estee Lauder (NYSE:EL) currently has an Earnings ESP of +2.46% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

General Mills (NYSE:GIS) presently has an Earnings ESP of +0.97% and a Zacks Rank #2.

Kraft Heinz (NASDAQ:KHC) currently has an Earnings ESP of +2.67% and a Zacks Rank #3.

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