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Tyson Stock Jumps 5% on Back of Solid Earnings

Zachary Stutler

Tyson Foods TSN reported its Q3 earnings before the opening bell on Monday morning. EPS came in line with our Zacks Consensus Estimate, while revenue fell short of expectations. Yet, a solid forecast for the future helped TSN stock jump 5%, bringing YTD growth to a whopping 59%. With the broader market plummeting today, the S&P 500 is down nearly 3%, TSN gaining so much shows the confidence and optimism investors have in the stock.

Tyson has also significantly outperformed the broader food market, which has gained 13.8% YTD. The market includes other food producers such as General Mills GIS, Kellogg K, Kraft Heinz KHC, and Hormel Foods HRL.

Q3 Overview

Tyson reported adjusted EPS of $1.47, which was what our Zacks Consensus Estimate called for. Revenue of $10.885 billion was 2% below our estimate of $11.11 billion. Although revenue did come in below expectations, it was still 8.3% higher than Q2 2018. This continues a long-term trend of revenue growth that Tyson has seen over the past decade. Tyson maintained its full year adjusted EPS guidance of $5.75-$6.10, with the high end well above our $5.97 Zacks Consensus Estimate.

Tyson’s beef and chicken segments were less successful this quarter than expected. Beef revenue of $4.157 billion was 4% below expectations of our Key Company Metrics. Meanwhile, chicken revenue for the quarter was $3.331 billion, 8% below expectations. Pork and prepared foods sales helped to make up for the other segments. Prepared foods and pork segments both saw year-over-year growth of 3.52% and 6.79%, respectively.

There were not any significant surprises, so the TSN price jump seems fairly unusual. But, Tyson’s solid guidance for the rest of fiscal 2019 could be fueling the stock price boost.

Q4 & Fiscal 2020 Outlook

In Q4, revenues are expected to be $11.16 billion, an 11.61% increase year-over-year. The revenue is expected to be fueled by growth across all sectors, as each of the company’s major revenue streams are expected to climb.

In its earnings report, Tyson reported that an outbreak of African Swine Fever is significantly impacting China, so the export environment is expected to be strong for Tyson over the next several quarters and possibly for a few years. The optimistic export outlook should help boost revenue and ultimately help Tyson’s bottom-line grow.

Tyson also has its Raised & Rooted brand launching this year. The alternative meat brand is likely to help boost Tyson’s revenue as companies such as Beyond Meat BYND and Impossible Foods have received a lot of attention and continue to grow in popularity. The Raised & Rooted brand will initially be selling plant-based nuggets and “blended burgers,” a mix of meat and plant protein.

Bottom Line

Even without its alternative meat products, Tyson has continued to grow and successfully record profits. If the company can continue this way, it may be a cash cow for investors for years to come. Tyson, in addition to selling its meat, has multiple brands that are more consumer focused. These brands, such as Jimmy Dean, Sara Lee, Ball Park, and Hillshire Farm, help Tyson to diversify its products and offer more to consumers than simply meat. These brands may help the company to continue to grow and outperform its rivals, especially those that do not have the same product diversification.

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Tyson Foods, Inc. (TSN) : Free Stock Analysis Report
 
Hormel Foods Corporation (HRL) : Free Stock Analysis Report
 
General Mills, Inc. (GIS) : Free Stock Analysis Report
 
Kellogg Company (K) : Free Stock Analysis Report
 
The Kraft Heinz Company (KHC) : Free Stock Analysis Report
 
Beyond Meat, Inc. (BYND) : Free Stock Analysis Report
 
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