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Can Cost Inflation Weigh on Tyson Foods' (TSN) Q2 Earnings?

Zacks Equity Research

Tyson Foods, Inc. TSN is scheduled to report second-quarter fiscal 2019 results on May 6, before the opening bell. We note that the bottom line of this renowned meat products company surpassed estimates in three of the trailing four quarters, with an average positive surprise of 7.4%. In the last reported quarter, the company delivered a positive earnings surprise of 1.9%. Let’s see what’s in store for the company this time around.

Factors at Play

Rising demand for protein-packed food products is a key catalyst aiding the company’s top line. Notably, Tyson Foods boasts a rich portfolio of protein packed brands, especially in the chicken and beef categories. Moreover, key strategic buyouts such as Keystone Foods business, AdvancePierre and Original Philly Holdings amongst others, have bolstered Tyson Foods’ protein offerings, and are expected to contribute to the company’s top line in the quarter under review. Apart from this, the company is poised to benefit from its focus on expanding fresh prepared foods offerings, on the back of consumers rising demand for natural fresh meat offerings. The company’s dominant presence in the meat-protein space is expected to support revenues in the to-be-reported quarter.

Additionally, Tyson Foods has undertaken radical measures to boost savings. The company’s Financial Fitness plan has been aiding supply-chain efficiencies. Synergies from the plan are likely to aid the upcoming quarterly results.

While such upsides are encouraging, there are certain headwinds that might impede Tyson Foods’ second-quarter results. We note that the company is witnessing rising input costs across the pork, beef and turkey categories. This combined with a tight labor market is expected to hinder the company’s upcoming earnings release.  Moreover, sluggish revenues in the pork category are likely to be a drag on the to-be-reported quarter’s performance.

How are Estimates Faring?

The Zacks Consensus Estimate for second-quarter earnings is pegged at $1.12, suggesting a decline of 11.8% from $1.27 reported in the year-ago quarter. Notably, the consensus mark has remained unchanged over the past 30 days. For revenues, however, the consensus mark stands at $10,226 million, indicating an improvement of of almost 4.6% from the year-ago quarter’s figure.

What Does the Zacks Model Predict?

Our proven model doesn’t show that Tyson Foods can beat bottom-line estimates this quarter. For this to happen, a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold).

Although Tyson Foods carries a Zacks Rank #3, its Earnings ESP of 0.00% makes us less confident about an earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks Poised to Beat Estimates

Here are a few companies you may want to consider as our model shows that they have the right combination of elements to beat earnings.

Church & Dwight CHD has an Earnings ESP of +1.06% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Inter Parfums IPAR has an Earnings ESP of +0.30% and a Zacks Rank #2.

Kellogg K has an Earnings ESP of +1.01% and a Zacks Rank #3.

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