Earnings preview: Tyson Foods (TSN) Seen Halving 1Q Earnings
By:NewsyStocks   Thursday, February 02, 2022 12:24 PM

Tyson Foods Inc. (NYSE:TSN) is expected to more than halve its earnings per share for the first quarter, hit by fall in operating margins in its chicken segment and soaring feed costs.

The Springdale, Arkansas-based meat processor has slashed its chicken production of over 6 percent and is also streamlining operations amid a tough economy and sharp increase in grain costs.

When the company reports its results on Feb.3, Friday, the focus will be whether the company will revise its sales forecast for 2012 and management's comments on costs and margins. Expectations

TSN is expected to report earnings per share of 34 cents for the first quarter from 75 cents in the same period of last year. Net sales are projected to advance 9 percent to $8.30 billion. 

Analyst Take

During the current month, eight analysts have recommended Tyson Foods as "Buy", while nine analysts gave "Hold" rating on the stock. There is no analyst to recommend "Sell" on the stock.

Fourth Quarter Results

TSN's fourth-quarter earnings per share fell 54 percent to 26 cents from 57 cents a year ago, while sales grew 12.9 percent to $1.63 billion. Cost of sales increased to $8.0 billion from $6.8 billion. Operating margin was 2.0 percent in the quarter, down from 3.8 percent in the third quarter and second quarter and 6.5 percent in the first quarter of last year. The company's chicken business slipped to a loss in the fourth quarter.

Earnings History

For the past four quarters, TSN earned 26 cents per share, 46 cents per share, 42 cents per share and 75 cents a share, respectively. The company's earnings topped analysts' expectations in two of four-quarter period, while bottom-line fell below consensus in the two quarters. On the top-line side, the company recorded net sales of $8.40 billion, $8.25 billion, $8.00 billion and $7.61 billion for the fourth, third, second and last year's first quarter respectively.

Versus Peers

TSN's gross margin for the trailing twelve-month period is below the industry average and its competitor Smithfield Foods Inc (NASDAQ: SFD). Its gross margin for the period was 6.81 percent versus industry average of 16.90 percent, and SFD's 13.75 percent. Operating margin stands at 3.98 percent compared to industry average of 4.43 percent and SFD's 7.33 percent.

Share Performance

In the past year, TSN has been trading between $15.60 and $21.06. The stock closed at $61.24, down 0.47 percent on Feb.1, 2012.

Our Take

Tyson has posted mixed earnings in the past year, though growing demand for beef and pork overseas should help prices move higher and boost the company's top line. The company needs to vastly improve on the margin front, particularly chicken, through improvement in mix and pricing.