Shares of $31-billion food company Tyson Foods, Inc. (NYSE: TSN) declined 8.5% to close at $80.10 on Monday after it delivered mixed results for the third quarter of Fiscal 2022 (ended July 2, 2022). Earnings missed the consensus estimate by 1.5% in the quarter, and sales exceeded the estimate by 1.9%.
Headquartered in Arkansas, Tyson Foods is one of the world’s largest processors and marketers of pork, chicken, and beef. Its popular product brands include Ball Park, Tyson, and State Fair.
Highlights of Tyson Foods’ Q3 Results
Tyson Foods reported adjusted earnings of $1.94 per share in the fiscal third quarter, down compared with the consensus estimate of $1.97 per share. On a year-over-year basis, the bottom line plummeted 28.1% because of higher costs and expenses, and an increase in tax rates (23.6% versus 22.1% in the year-ago quarter).
Revenues in the quarter were $13.5 billion, up from the consensus forecast of $13.24 billion. Also, the top line exceeded the year-ago tally by 8.2% on the back of sales growth of 25.6% in the Chicken segment, 5.3% in the Prepared Foods segment, and 23.4% in the International/Other segment. However, sales of the Pork segment were down 5.6% year-over-year. Revenues of the Beef segment were almost flat.
The top-line growth was partially offset by a 9.4% year-over-year increase in the cost of sales and 3.6% growth in selling, general and administrative expenses. Gross profit decreased 0.6% to $1,611 million, while gross margin was down 1.1 percentage points to 11.9% in the third quarter.
Likewise, the adjusted operating income of $998 million declined 27.3% year-over-year, and the adjusted operating margin decreased 3.6 percentage points to 7.4%. Supply-chain constraints and labor-market issues played spoilsports in the quarter.
According to TipRanks’ Risk Analysis tool, Tyson Foods is exposed to seven risks from the Production risk category, which include employment, manufacturing, supply chain, and costs. In total, the tool has identified 31 risks for Tyson Foods.
Projections by Tyson Foods
For the Fiscal Year 2022, the company anticipates revenues to be within the $52-$54 billion range. The top-line projections reflect an improvement over $47.05 billion generated in Fiscal 2021 (ended October 2, 2021).
Volumes are forecast to be flat year-over-year, compared with the 1% to 2% growth predicted earlier. Challenging macro conditions are forecast to impact consumer demand.
Tyson Foods forecasts synergies from its productivity programs to be over $1 billion by Fiscal 2024. Of this, the company expects to realize over $400 million in benefits in Fiscal 2022.
Capital Deployment by Tyson Foods
Exiting the third quarter of Fiscal 2022, Tyson Foods had cash and cash equivalents of $1,056 million, down compared with $2,507 million at the end of Fiscal 2021.
The third-quarter cash balance includes the impact of $1,890 million cash generated from operating activities, $1,323 million cash used on capital expenditures, and $1,148 million cash used for repaying debts. Notably, the company’s long-term debt was $8,261 million at the end of the fiscal third quarter.
Also, the company used $693 million to purchase common stocks and $491 million for paying dividends.
Is It the Right Time to Buy or Sell Tyson Foods Stock?
As of now, a wait-and-watch strategy could be a nice idea for prospective investors, especially considering Tyson Foods’ earnings miss in the fiscal third quarter, exposure to labor problems and supply-chain constraints, and lower volume forecast for Fiscal 2022. Shares of TSN are down 8.8% year-to-date.
Investors already holding TSN stock could consider the company’s brand value, healthy demand for products, productivity initiatives, and revenue growth expectations for Fiscal 2022 before taking any call.
On August 8, Michael Lavery of Piper Sandler changed the rating on TSN stock to Hold from Sell while reiterating his price target of $79 (1.37% downside risk).
On TipRanks, TSN stock commands a Hold consensus rating based on five Holds and one Sell. TSN’s average price forecast is $92.60, reflecting an upside potential of 15.61% from the current level.
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