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Will Rising Beef Demand Drive Tyson Foods’ (TSN) Q4 Earnings?


Tyson Foods, Inc. TSN is slated to report fourth-quarter fiscal 2017 results on Nov 13, before the opening bell.

We expect the company to continue gaining from rise in demand at the beef and chicken segments. Rising preference for protein rich brands in the prepared foods category is also expected to favor Tyson Foods’ performance in the to-be-reported quarter.

Let’s now take a look at how things are shaping up for this announcement.

Which Way are Estimates Treading?

The Zacks Consensus Estimate for the fourth quarter and fiscal 2017 has improved in the last 30 days. Estimates for the fourth quarter moved up 2 cents to $1.37. The consensus mark for fiscal 2017 depicts an increase of 3 cents to $5.22. We note that on Sep 28, management raised fiscal 2017 earnings outlook to the range of $5.20-$5.30 per share, higher than the previous guidance of $4.95-$5.05.

The current Zacks Consensus Estimate for the fourth quarter and fiscal 2017 reflects year-over-year growth of 42.7% and 18.9%, respectively. Further, analysts polled by Zacks expect net sales of $9,951 million for the said quarter, up 8.7% from the year-ago quarter. Also, sales for fiscal 2017 are projected to inch up 2.9% to $38 billion.

Tyson Foods, Inc. Price, Consensus and EPS Surprise

Factors at Play

Tyson Foods has been benefitting from increased demand across beef, pork and chicken segments. The company’s prepared food segment has also been witnessing steady growth backed by the surging demand for protein-packed brands. These factors are expected to favorably impact the company’s top and bottom line in the upcoming quarterly results.

Notably, the consensus mark for sales in the beef segment is projected to grow 4.8% to reach $3,645 million in the fourth quarter. Improved availability of cattle supply, surging domestic demand and higher exports are likely to favor the beef segment’s performance. The consensus estimate for sales in the pork segment is expected to move up 5% to $1,297 million, backed by improving demand for pork products. Also, this category has been gaining from higher exports for a while. This may serve as a tailwind in the fourth quarter.

Tyson Foods’ chicken segment has also been depicting sturdy growth, driven by the increasing number of health-conscious consumers who have been shifting away from processed food and red meat. The segment has also been serving as a suitable platform for undertaking innovation and adding new products to an already rich food line up. Driven by such upsides, the consensus mark for sales at the chicken segment in the fourth quarter is expected to increase 3.7% to reach $2,916 million.

Moving on, Tyson Foods’ prepared food segment is also expected to continue benefiting from the positive synergies of the AdvancePierre buyout. Through the acquisition, management has also been trying to expand fresh food offerings alongside of steady advancement in the protein brands portfolio. Driven by such factors, consensus estimate for sales in the prepared food segment is expected to surge 22.3% to reach $2,247 million in the upcoming fourth-quarter results.

In addition to expanding product portfolio, the company is reinventing its supply-chain and procurement processes, while lowering overhead expenses to boost savings. It has also been streamlining operations and adhering to downsizing in several locations to combat rising wage-related costs.

What does the Zacks Model Unveil?

Our proven model shows that Tyson Foods is likely to beat earnings estimates this quarter. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. You may uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Tyson Foods has an Earnings ESP of +1.28% and carries a Zacks Rank #2, which makes us reasonably confident of an earnings beat.

Stocks With Favorable Combinations

Here are some companies which, according to our model, have the right combination of elements to deliver earnings beat.

Nomad Foods Limited NOMD has an Earnings ESP of +8.70% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here

Energizer Holdings Inc ENR has an Earnings ESP of +0.35% and a Zacks Rank #2.

United Natural Foods, Inc. UNFI has an Earnings ESP of +6.33% and a Zacks Rank #2.

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