Tyson Foods, Inc. TSNis slated to report second-quarter fiscal 2018 results on May 7, before the opening bell. Rising demand for protein-rich products has been favoring Tyson Foods’ performance. Positive synergies from buyouts and cost-saving efforts have also been fueling the company’s growth.
However, we note that Tyson Foods has a mixed record of earnings surprises over the trailing four quarters.
Factors Impacting Q2
Rising demand for protein and meat products has been an aspect of cheer for Tyson Foods for a while. This is evident from the fact that sales volumes across the Beef, Chicken and Prepared Foods segments increased 4.5%, 7.3% and 11.6%, respectively, during the first quarter of fiscal 2018. Further, management expects demand for protein to continue to rise and is well placed to exploit opportunities in the space. For fiscal 2018, USDA expects overall domestic protein production (chicken, beef, pork and turkey) to rise roughly 3% year over year.
Such a positive market scenario has driven Tyson Foods to make several investments and cater to consumers’ demand efficiently. The company’s investments in Memphis Meats and Beyond Meat are the latest examples. It has also been bolstering its poultry production capacity in Tennessee and other regions. Apart from this, the company has been steadily expanding fresh prepared foods offering, courtesy of consumers’ rising demand for natural fresh meat offerings without added hormones or antibiotics.
Buyouts Add Strength to Portfolio
Tyson Foods’ prepared food segment is expected to benefit from the positive synergies of the AdvancePierre buyout. Through this acquisition, management has been trying to expand fresh food offerings along with bolstering protein brands portfolio. The acquisition led to a 2.4% and 9.5% rise in sales volume during the third and fourth quarters of fiscal 2017, respectively. In first-quarter fiscal 2018 sales volume jumped 11.6%. Further, the company expects incremental sales of approximately $1.1 billion from AdvancePierre in fiscal 2018. Also, the company is on track to integrate Original Philly Holdings (acquired in November 2017) within its Prepared Foods segment.
Driven by such positives, analysts polled by Zacks expect sales across Beef, Chicken, Pork and Prepared Foods segments to rise 6%, 6.1%, 2% and 17.3%, respectively, in the yet-to-be-reported quarter. Also, the Zacks Consensus Estimate for net sales for the impeding quarter is expected at $9,954 million, depicting a rise of almost 9.6% from the prior-year quarter’s figure.