Tyson Foods Projects Lower Sales Amidst Falling Meat Prices and Demand

Tyson Foods, the largest meat packer in the U.S. by sales, presented a slightly gloomy forecast for the next fiscal year this Monday, predicting revenue below Wall Street’s projections. This comes after the company witnessed a dip in its fourth-quarter sales due to falling chicken and pork prices and slowing beef demand.

Despite the lower-than-expected revenue, Tyson managed to deliver a surprising quarterly profit, exceeding estimates. This was primarily driven by the improved performance of its businesses during the second half of fiscal 2023.

Throughout 2023, the meat industry giant faced a unique set of challenges, as all its beef, pork, and chicken units were affected by supply issues. According to Reuters, “Tyson’s beef business, its largest unit, is struggling as U.S. cattle inventories have declined to decades lows, while its chicken and pork businesses grappled with excess supplies this year.” Moreover, a robust dollar hampered U.S. beef exports, while high food prices and interest rates led American consumers to curtail some of their meat purchases, further straining household budgets.

However, Tyson’s CEO Donnie King remains optimistic, stating that the company is operating with greater efficiency and the demand for protein remains robust. Tyson has been streamlining its operations, which included job cuts and closing some U.S. chicken processing plants.

Tyson managed to post an operating margin of 1.8% for its chicken business in the quarter ending Sept. 30, seeing a reversal of fortune after losses in the two preceding quarters. However, Tyson’s largest unit, the beef business, recorded a fall in quarterly sales volume of 6.7%, even though prices rose by 10.2%. The company anticipates an adjusted operating loss of between $400 million and breakeven in fiscal year 2024 for this unit, primarily owing to restricted U.S. cattle supplies.

Overall, Tyson expects its total sales for fiscal 2024 to remain static at $52.88 billion, a figure below the analysts’ average projection of $54.4 billion, according to LSEG data. The company’s fourth-quarter sales dropped 2.8% to $13.35 billion, falling short of analysts’ predictions of $13.71 billion. Yet Tyson managed to surpass expectations on profits, reporting adjusted earnings of 37 cents per share as opposed to the expected 29 cents.

According to MarketWatch, “The U.S. Department of Agriculture indicated fiscal 2024 protein production will ‘decrease slightly’ from 2023 levels, with beef production down 5% while production of pork increases 2% and of chicken increases ‘slightly.’”

Furthermore, “Tyson’s stock has dropped 17.8% over the past three months and has tumbled 27.1% year to date, while the S&P 500 index SPX has slipped 1.1% the past three months but has rallied 15.1% this year.”