Tyson Foods Inc. (TSN) shares fell by over 9 percent on Monday after the company said that many of its profitable brands were seeing lower sales due to inflation, leading to a decrease in consumer spending and higher costs of commodities. Some of its brands will continue to see lower sales as discretionary food spending could decrease in the third quarter. The meatpacker reported better earnings but lower revenue in the second quarter than analysts’ estimates.
During an earnings call, Chief Financial Officer John Tyson spoke of “uncertainties.” The company had concerns about consumer behavior, cattle supplies, and costs of key commodities.
Although the Springdale, Arkansas-based company reported better earnings in the second quarter compared with Wall Street projections, it lost out on revenue estimates. The subdued outlook for the third quarter, which is generally the best for the meatpacker, led to a decline in the share price of Tyson Foods.
The large US meatpacker reported an adjusted net income of 62 cents in the quarter ending March 30. This reversed a loss of 4 cents that was reported in the same quarter last year. The earnings were higher than all the estimates by different Wall Street analysts. Tyson Foods also adjusted its operating profits outlook.
Tyson Foods’s chicken business brought back profitability to the meatpacker, increasing its profit to $158 million. Last year, the company shut down six poultry units and streamlined its operations. The pork units also performed well, but the beef units lost profits.
Tyson Foods’ beef unit reported a loss of $34 million. These losses were attributed to higher cattle costs, although the company raised its prices and improved volumes. Overall sales stood at $13.07 billion for the second quarter, while FactSet analysts had estimated a higher revenue of $13.16 billion.
The largest meat company in the US faces some uncertainty in the third quarter of the year but projects an improvement in the fourth quarter. CWEB analyzes Tyson Food stock as neutral.
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