Tyson Foods, Inc. (TSN) released its Q3 2024 earnings report today, marking a positive turnaround. Following the release, the stock rose by 3.5%. The company, known for its brands like Tyson, Jimmy Dean, and Hillshire Farm, has posted some impressive numbers. Let’s dive into the key earnings insights and see what this means for the food giant.
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TSN’s Sales and Income: A Mixed Bag
In the first nine months, Tyson Foods reported sales of $39.7 billion, a modest increase of 0.5% compared to last year. But here’s where it gets interesting: their GAAP operating income skyrocketed to $884 million, a huge jump of $816 million from the previous year. Adjusted operating income also saw a significant boost, up 88% to $1.3 billion.
The third quarter alone had some impressive numbers. Sales were up 1.6% to $13.4 billion. GAAP operating income surged by $691 million to reach $341 million. Adjusted operating income jumped an impressive 174% to $491 million. CEO Donnie King attributes this success to disciplined actions and a strong focus on fundamentals, leading to the highest adjusted operating income in seven quarters.
Tyson’s Earnings Per Share Soared
Earnings per share (EPS) also saw substantial growth. For the first nine months, adjusted EPS was $2.18, marking a 125% increase. The third-quarter numbers were even more striking, with adjusted EPS reaching $0.87, a remarkable 480% increase, surpassing analysts’ consensus estimate of $0.67.
Cash Flow and Margins: Improving Financial Health
Tyson Foods generated $1.97 billion in cash from operating activities in the first nine months, up 38% from last year. Free cash flow reached $1.09 billion, a significant improvement of $1.22 billion from the prior year. The company’s liquidity stood at around $4.8 billion as of June 29, 2024.
Operating margins also improved. The total company GAAP operating margin for the first nine months was 2.2%, while the adjusted operating margin was 3.3%. For the third quarter, GAAP operating margin was 2.6%, and adjusted operating margin was 3.7%.
TSN’s Cautious but Optimistic Outlook
Tyson Foods has a cautious but optimistic outlook for Fiscal 2024. The USDA projects a slight increase in domestic protein production, with beef production expected to decrease by 2%, pork to increase by 3%, and chicken production to remain flat. Tyson anticipates adjusted operating income for the year to be between $1.6 billion and $1.8 billion.
They also expect capital expenditures between $1.2 billion and $1.3 billion, focusing on profit improvement projects, maintenance, and innovation. Net interest expense is projected to be around $395 million, and total liquidity is expected to stay above $1 billion, even after retiring $1.25 billion in senior notes due in August 2024.
Tyson’s Priorities Going Forward
For Fiscal 2024, Tyson Foods plans to focus on things they can control. They will invest in projects and manage their money to keep cash flowing and support dividends. They also aim to improve their factories, continue making their chicken segment better, and keep their prepared foods strong. Additionally, they will manage beef production and make pork operations more efficient.
Is Tyson Foods a Good Stock to Buy?
Analysts remain sidelined about TSN stock, with a Hold consensus rating based on 2 Buys, seven Holds and one Sell. Over the past year, TSN has increased by 18.6%, and the average TSN price target of $60.50 implies a downside potential of 2.75% from current levels. These analyst ratings are likely to change following TSN’s results today.
