Tyson Foods’ Q2 Results Increase Investors’ Appetite

Tyson Foods, Inc. (NYSE: TSN) has reported stellar second-quarter results despite the ongoing supply chain constraints and an inflationary environment. Following the news, shares of the company rose 2.2% to close at $92.84 on Monday.

Tyson is a food company, which is engaged in the production of processed food. It operates through its Chicken, Beef, Pork, and Prepared Foods segments. Shares of Tyson have increased 6.3% year-to-date.

Results in Detail

Tyson reported adjusted earnings of $2.29 per share, up 70.9% year-over-year, surpassing analysts’ estimates of $1.91 per share.

Sales increased 16.1% year-over-year to $13.1 billion, outpacing expectations of $12.9 billion. The upside can be attributed to the growth witnessed across all segments due to higher average sales prices, which were driven by higher input costs.

During the quarter, the company reduced its total debt by about $1 billion. As of April 2, 2022, Tyson had liquidity of $3.4 billion.

The President and CEO of Tyson, Donnie King, said, “Although we continue to see inflationary pressures across the supply chain, we are working to drive costs down by continuing to increase our efficiency, productivity, and bringing more capacity on line. This is all part of our strategy to win with customers and consumers, win with team members and win with excellence in execution.”

Outlook

Based on the current business momentum and the United States Department of Agriculture’s (USDA) outlook on domestic protein production (beef, pork, chicken, and turkey), which is expected to remain relatively flat compared to Fiscal 2021 levels, Tyson has raised its revenue guidance.

For Fiscal 2022, sales are now projected to be between $52 billion and $54 billion, compared with the prior guidance of $49 billion and $51 billion. The consensus estimate for the same is pegged at $51.9 billion.

Moreover, capital expenditures are projected at $2 billion for the year, which will be utilized for expansion, automation, and brand and product innovation.  

The company expects total liquidity to remain above minimum liquidity target of $1 billion.

Price Target

Based on three Holds and one Sell, the stock has a Hold consensus rating. Tyson’s average price forecast of $94.50 implies 1.8% upside potential from current levels.

Insider Trading

Based on the recent corporate insider activity on TipRanks, corporate insider sentiments seem to be Very Negative on Tyson. This means that over the past quarter there has been an increase in insiders selling their shares of TSN.

Conclusion

Tyson’s performance in the second quarter looks impressive. However, amid the current inflationary environment, demand for the company’s products may decline, thereby, impacting its performance.

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