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Tyson Foods Inc. Bets High on Earnings Forecast

Tyson Foods Inc. Bets High on Earnings Forecast

Monday, May 9th, 2016

With record high quarterly margins and an expectation of good cattle supply, Tyson Foods is bolstering its projections for the rest of the year.

Donnie Smith, President and CEO, Tyson Foods“Our business continues to perform very well, delivering record second quarter operating income and return on sales, in what is typically the most challenging quarter of our fiscal year,” Donnie Smith, President and Chief Executive Officer of Tyson Foods, said in a press release. “We’re in a great position, and we’re generating momentum that will take us into 2017 and beyond. We’ve produced record results in the first half of the fiscal year, and we expect continued strong performance in the second half. To reflect what we’ve accomplished, and to demonstrate our confidence, we’re raising adjusted earnings guidance for fiscal 2016 to $4.20-4.30 per share.”

As seen above, Tyson's stock spiked upon the release of its second quarter financials, up 1.46% as of yesterday at 4:49 PM EDT.

Some of the boosts backing Tysons’ confidence, according to Smith, include:

  • Sales growing in key retail product lines
  • Payoffs in the company’s investments in pricing and marketing, including increased volumes in strategic products
  • Solid performances by all segments, providing strong cash flows

That cash flow included the use of $400 million to repurchase 6.9 million shares during the quarter, while capturing $144 million in synergies, with $67 million incremental to fiscal second quarter 2015.

On the marketing side, Smith said that Tyson has differentiated its chicken business with several moves, among which was being more consumer-driven, diversifying the company’s pricing mechanisms, improving cost structure, and the implementation of its ‘Buy vs. Grow’ strategy.

“Because of the actions we’ve taken, and because those actions have proven to produce higher, more stable margins, we’re raising the annual normalized margin range for the chicken segment to 9-11%,” Smith commented.

So what does Tyson see, looking down the line?

“With a focus on the longer term, we have a three-year pipeline of innovation across all segments with exciting new product launches to keep our offerings in the retail, foodservice, and international channels relevant to consumers,” the President and CEO said.

Also in the works is a larger partnership with Amazon, whcih the company unveiled in its earnings call, according to Business Insider. 

"We're expanding our relationship with Amazon Fresh to sell fresh protein as well as partner with them around innovation. We plan to launch Tyson Taste Makers, a line of chef-inspired meal kits in premium proteins for home delivery with Amazon Fresh this fall," Smith concluded, leaving us to wonder what else the company’s strategy has in store.

As those plans unfold, DeliMarket News will look to keep you informed.

Tyson Foods

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Tyson Foods, Inc., founded in 1935, is one of the world's largest producers of chicken, beef, pork, and prepared foods.

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