Tyson Foods, Inc. TSN has been showcasing resilience through its diverse portfolio that includes various proteins, channels and categories.  In the third quarter of fiscal 2024, the company reported notable improvements in profitability, reflecting the effectiveness of its operational strategies. The Chicken segment, in particular, excelled, leading the company to raise its overall adjusted operating income guidance for the year. 

However, ongoing difficulties in the Beef segment due to rising cattle costs present challenges. Despite the strong performance in some segments, Tyson Foods expects overall sales to remain flat year over year in fiscal 2024. This could be seen as a concern for investors looking for top-line growth, especially given the pressures in certain areas like Beef.

Tyson Foods’ Key Growth Strategies

Tyson Foods' strategy is anchored in three key pillars — operational excellence, customer and consumer obsession and sustainability. Operational excellence is achieved through continuous improvement initiatives that enhance productivity and efficiency across all segments, supported by a robust supply chain optimization strategy. This includes thorough cash flow management and disciplined capital allocation. Tyson Foods emphasizes driving operational efficiencies across all segments, particularly in Chicken, Pork and Prepared Foods. This includes optimizing plant utilization and enhancing supply-chain management.

The second pillar, customer and consumer obsession, drives Tyson Foods’ commitment to understanding and responding to evolving consumer preferences. By leveraging consumer insights and promoting brand loyalty through quality products, the company not only meets market demands but also develops lasting relationships with customers. This is represented by successful product innovations, such as the Jimmy Dean Griddle Cakes, which resonate strongly with consumer needs. 

Finally, Tyson Foods’ focus on sustainability underscores its commitment to ethical sourcing and responsible production practices, addressing the increasing consumer demand for sustainable food options. Together, these pillars position Tyson Foods for continued growth and resilience in the competitive protein market.

TSN's Solid Chicken Performance, Ups View

Tyson Foods’ Chicken segment emerged as a standout performer, delivering $307 million in adjusted operating income (AOI) — the best fiscal third-quarter profit in eight years. The company raised its guidance for the Chicken segment, wherein it now envisions AOI of $850-$950 million for fiscal 2024 compared with the previous view of $700-$900 million. This success is attributed to operational improvements, market tailwinds and strategic investments in value-added products. Tyson Foods’ focus on optimizing the entire value chain in Chicken, from live operations to plant utilization, has driven efficiencies that have bolstered profitability.

Tyson Foods raised its fiscal 2024 AOI guidance for the overall company, driven by the strong performance in Chicken and Pork. The company now expects total AOI between $1.6 billion and $1.8 billion for fiscal 2024 compared with $1.4-$1.8 billion projected earlier. This increased guidance reflects the confidence in continued strong execution and improving market conditions in key segments.

Challenges on TSN’s Path

Tyson Foods continues to face significant headwinds in its Beef segment, with elevated cattle costs compressing margins. While Beef revenues increased 5.8% year over year, higher cattle costs outweighed gains, leading to compressed spreads and lower AOI. Tyson Foods anticipates that the cattle cycle will remain challenging, and its AOI guidance for Beef reflects an expected loss between $300 million and $400 million. This pressure on Beef margins could weigh on overall profitability in the near term. 

Tyson Foods, like many other global companies, faces ongoing macroeconomic uncertainties that could impact demand for protein products. Volatile currency movements, fluctuating commodity prices and potential slowdowns in consumer spending pose risks to both international and domestic operations. Shifts in global demand, particularly in key export markets, could impact sales in Tyson Foods’ Beef and Pork segments.

Wrapping Up

The abovementioned upsides are likely to help the Zacks Rank #3 (Hold) company counter challenges and remain well-placed for growth. The Zacks Consensus Estimate for TSN’s current fiscal-year earnings per share has risen from $2.61 to $2.82 over the past 60 days. The consensus mark indicates substantial growth from $1.34 reported in the year-ago period.

Shares of TSN have risen 3.8% in the past three months compared with the industry’s growth of 5.3%.

Stocks to Consider

Here, we have highlighted three better-ranked food stocks — The Chef's Warehouse CHEF, Flowers Foods FLO and McCormick & Company, Inc. MKC.

The Chef’s Warehouse, which distributes specialty food products, currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

CHEF has a trailing four-quarter earnings surprise of 33.7%, on average. The Zacks Consensus Estimate for The Chef’s Warehouse’s current fiscal-year sales and earnings indicates growth of 9.7% and 12.6%, respectively, from the year-ago reported numbers.

Flowers Foods, one of the largest producers of packaged bakery foods in the United States, currently carries a Zacks Rank #2 (Buy). FLO has a trailing four-quarter earnings surprise of 1.9%, on average. 

The Zacks Consensus Estimate for Flowers Foods’ current financial-year sales and earnings suggests growth of around 1% and 5%, respectively, from the year-ago reported numbers.

McCormick is a leading manufacturer, marketer and distributor of spices, seasonings, specialty foods and flavors. It currently carries a Zacks Rank of 2.

The Zacks Consensus Estimate for McCormick & Company’s current fiscal-year sales and earnings indicates advancements of 0.2% and 5.6%, respectively, from the year-ago reported figures. MKC has a trailing four-quarter earnings surprise of 8.3%, on average.

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