Tyson Foods (TSN +9%) saw a significant stock breakout after surpassing analyst earnings estimates for Q4. Despite projecting FY25 revenue growth below expectations, with a flat to 1% decline year-over-year, the company remains optimistic. This outlook reflects minimal changes in consumer behavior, declining pork prices, and uncertainty in cattle herds.
After a turbulent year marked by plant shutdowns and layoffs, investors are encouraged by TSN's improved volumes and profitability in Q4. The market is optimistic about TSN's adjusted operating income projections for FY25, indicating sustained profitability despite modest revenue growth.
- TSN exceeded earnings estimates for the fourth consecutive quarter, with a nearly 150% year-over-year increase in its bottom line to $0.92. Adjusted operating income reached $512 million, with a 3.8% margin, marking the best quarterly performance of the year. This was achieved through operational efficiencies, including closing four chicken processing plants and workforce reductions in 1H24, helping counter inflationary costs and an unfavorable product mix.
- Revenue increased by 1.6% year-over-year to $13.56 billion. The Beef segment led with 4.6% sales growth and a 3.7% volume increase, despite a nearly 1% price rise. Chicken sales grew by 2.3% due to rising prices, although volumes decreased by 0.7%. Pork revenue fell by 3.7% due to a nearly 7% price drop, while Prepared Foods saw flat revenue growth with a 1.4% volume decline.
- Overall, volumes increased by 0.5%, following a 1.1% rise last quarter. This improvement is supported by a shift in consumer behavior towards cooking at home, as away-from-home food prices rise faster than at-home prices.
- Looking forward, TSN expects similar profitability in FY25, despite uncertain cattle supply and volatile pork prices. The company projects an adjusted operating loss for Beef, but aims for adjusted operating income of $0.1-0.2 billion for Pork and $1.0-1.2 billion for Chicken, matching FY24 figures.
TSN concluded a challenging year positively, gaining momentum for FY25. With potentially conservative guidance and easing inflationary pressures, TSN might raise its targets. As consumers continue to cook more at home, TSN could build a stronger foundation for long-term growth.
