Company Trend Analysis - Underperformance To Continue Amid Weak Sales Growth - OCT 2017

BMI View: We maintain our core view from December 2016 and expect Tyson Foods to perform on par with the S&P 500, with a bias towards underperformance over the coming quarters. Sales and operating earnings growth in the company's three main divisions continue to struggle, with growth from the prepared foods segment only somewhat mitigating this weakness. Over time, management's singular focus to increase growth sustainably will ultimately prove beneficial.

Tyson Foods is one of the world's largest processors and marketers of chicken, beef and pork, with a presence in more than 80 countries. The company works with over 6,000 independent chicken contractors and supplies several of the largest restaurant chains in the US.

Tyson Foods' sales fell slightly year-on-year in Q217, as did earnings. More specifically, total sales in Q217 fell by 1.0% to USD9.08bn, as sales fell in three of the company's four main divisions (only pork sales increased year-on-year). Indeed, sales for prepared food were the lowest for Q2 since the acquisition of Hillshire Brands in mid-2014. For the prepared foods and beef divisions, sales fell because of both lower volumes and lower prices in the case of prepared foods. Elsewhere, both the pork and poultry sectors saw weaker sales volumes, but the pork sector benefited from a strong increase in average prices while the poultry sector did not.

Earnings Rising But Sales Flatlining
Tyson - Trailing 12-Month Sales (RHS) & Other Select Earnings Measures, USDmn (LHS)
Source: Bloomberg

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