Challenging market dynamics and operational inefficiencies weighed on the Q1 profitability of Tyson Foods (NYSE:TSN), a leading food company focusing on protein. Thus, to optimize operations and improve profitability, especially in the Chicken segment, TSN plans to close two chicken plants and reduce its workforce by eliminating 1,700 jobs. However, analysts remain cautious about TSN’s prospects.
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Citing a statement by the company’s spokesperson, the Wall Street Journal reported that the company’s inability to economically enhance operations at their current scale is the reason behind the management’s decision to eliminate jobs and close Chicken facilities.
Notably, Tyson Foods’ adjusted operating income declined to $453 million in Q1 compared to $1,432 million in the prior-year quarter. Management blamed inflationary impacts on raw material and supply chain costs for the significant decline in adjusted operating income.
As for the Chicken segment, management said that certain things didn’t go as planned during the first quarter. The segment witnessed higher costs, lower price movements, and weak demand in specific markets where it expected demand to remain strong.
While TSN focuses on optimizing plant utilization and implementing various productivity initiatives, the short-term challenges and expected seasonality will likely hurt its Q2 financials. Nonetheless, TSN expects its performance to improve in the second half of 2023.
What’s the Prediction for TSN Stock?
Given the short-term macro and operational headwinds, analysts are bearish about TSN stock. It has received five Holds and two Sell recommendations for a Moderate Sell consensus rating.
TSN stock has dropped nearly 33% in one year. Despite this decline, analysts’ average price target of $61 implies an upside potential of just 6.46%.
