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S&P 500   3,585.62
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In 20 years, this little-known trader didn’t have a single losing year… (Ad)
Russia accused of 'kidnapping' head of Ukraine nuclear plant
EU chief: New Greece-Bulgaria gas pipeline 'means freedom'
In 20 years, this little-known trader didn’t have a single losing year… (Ad)
Danish Energy Agency says Nord Stream 2 gas pipeline under Baltic Sea appears to have stopped leaking gas
UK train strikes and energy hikes add to a week of turmoil
In 20 years, this little-known trader didn’t have a single losing year… (Ad)
NIH to fund unproven ALS drugs under patient-backed law
Russia blindfolds, detains Ukraine nuclear plant chief
S&P 500   3,585.62
DOW   28,725.51
QQQ   267.26
Want to Increase Your Conversion Rates? This Is the Biggest Threat to Your Success.
In 20 years, this little-known trader didn’t have a single losing year… (Ad)
Russia accused of 'kidnapping' head of Ukraine nuclear plant
EU chief: New Greece-Bulgaria gas pipeline 'means freedom'
In 20 years, this little-known trader didn’t have a single losing year… (Ad)
Danish Energy Agency says Nord Stream 2 gas pipeline under Baltic Sea appears to have stopped leaking gas
UK train strikes and energy hikes add to a week of turmoil
In 20 years, this little-known trader didn’t have a single losing year… (Ad)
NIH to fund unproven ALS drugs under patient-backed law
Russia blindfolds, detains Ukraine nuclear plant chief
S&P 500   3,585.62
DOW   28,725.51
QQQ   267.26
Want to Increase Your Conversion Rates? This Is the Biggest Threat to Your Success.
In 20 years, this little-known trader didn’t have a single losing year… (Ad)
Russia accused of 'kidnapping' head of Ukraine nuclear plant
EU chief: New Greece-Bulgaria gas pipeline 'means freedom'
In 20 years, this little-known trader didn’t have a single losing year… (Ad)
Danish Energy Agency says Nord Stream 2 gas pipeline under Baltic Sea appears to have stopped leaking gas
UK train strikes and energy hikes add to a week of turmoil
In 20 years, this little-known trader didn’t have a single losing year… (Ad)
NIH to fund unproven ALS drugs under patient-backed law
Russia blindfolds, detains Ukraine nuclear plant chief

Is Tyson Foods A Buy On Post-Earnings Weakness? 

Is Tyson Foods A Buy On Post-Earnings Weakness? 
  • Tyson had a decent quarter but the results reveal the impact of inflation
  • Tyson is a deep value relative to its peers because of the dividend
  • The guidance for the full year is favorable

Shares of Tyson Foods (NYSE: TSN) are down more than 9.0% in the wake of the Q2 earnings report and offering a discount to investors. The stock is trading at about 9.6X its earnings compared to competitors like Hormel Foods (NYSE: HRL) which trades closer to 26X its earnings and even Kraft-Heinz (NASDAQ: KHC) which trades near 14X earnings but there is a difference.
Hormel is paying far more of its earnings in dividends and Kraft-Heinz far more in yield and both have at least as healthy an outlook for dividend growth as Tyson Foods. The question for investors now is if support will hold at the $81 level or fall through on the tightening margin. 

Tyson Falls On Mixed Quarter 

Tyson had a decent quarter but the results reveal the impact of inflation and lack of COVID stimulus in the economy. The company’s $3.5 billion in net revenue is up 8.2% versus last year and beat the consensus by 190 basis points but due in total to higher pricing. The company says volume declined by 1.9% versus last year and was offset by an 8.1% increase in pricing and the internal metrics are even more mixed. On a segment basis, the Chicken and Prepared Foods segments grew and widened margins while the Beef and Pork segments were flat to down and saw their margins contract. In regard to chicken and prepared food pricing, those segments are up 20% and 14% each, and market fundamentals are supportive of pricing over the next year. 

Moving on to the margin and earnings, the company reported a contraction in both the GAAP and adjusted operating margins with the adjusted margin shrinking 340 basis points to only 7.4%. This resulted in GAAP EPS of $2.07 which is up 1% YOY and adjusted EPS of $1.94 or down 28% YOY. The worst part of the news is that margin contracted more than expected and resulted in a $0.03 miss in adjusted earnings despite the top-line strength but there are some mitigating factors including an increase in investment activities. 


The guidance for the full year is favorable although there is risk in the outlook. The company is expecting to see revenue in the range of $52 to $54 billion in net revenue with margin improvement in 3 of the 4 segments versus the Q3 results. This compares to the consensus revenue target of $52.75 billion and has the company on track to exceed the full-year EPS outlook by a double-digit margin of error. The risk is that Q4 revenue is projected to grow 7% sequentially and 13% YOY which may be a tough bar to beat. 

Tyson Dividend Growth Is Safe 

Tyson is a deep value relative to its peers but that may be because of the dividend. The stock is paying out 2.1% in yield compared to Hormel’s 2.1% but there is a potential catalyst in the numbers. Tyson’s payout is only 18% of its earnings estimate compared to over 50% for Hormel. The potential catalyst is a dividend increase and/or increases that would put the Tyson payout in-line with its closest peer. Based on the balance sheet and outlook, a single large increase is unlikely but investors should expect to see the 10-year history of increases extend indefinitely and at an aggressive double-digit pace. The company has been increasing at a 17% CAGR the last 5 years and could easily continue at this pace. 

The Technical Outlook: Tyson Breaks Support 

The price action in Tyson Foods stock fell more than 9.0% in the wake of the earnings report but may find support at or near the $82 level. If this level can hold, the stock should move sideways within this range for the foreseeable future. If not, shares of Tyson may fall down to the $75 level or lower where the value and dividend would be even more attractive. 


Is Tyson Foods A Buy On Post-Earnings Weakness? 

Tyson Foods is a part of the Entrepreneur Index, which tracks some of the largest publicly traded companies founded and run by entrepreneurs.

Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Tyson Foods (TSN)
2.3146 of 5 stars
$65.93-1.4%2.79%5.92Hold$93.13
Kraft Heinz (KHC)
2.2845 of 5 stars
$33.35-0.6%4.80%27.34Hold$40.44
Hormel Foods (HRL)
1.889 of 5 stars
$45.44-1.0%2.29%24.83Hold$48.00
Compare These Stocks  Add These Stocks to My Watchlist 

Should you invest $1,000 in Tyson Foods right now?

Before you consider Tyson Foods, you'll want to hear this.

MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Tyson Foods wasn't on the list.

While Tyson Foods currently has a "Hold" rating among analysts, top-rated analysts believe these five stocks are better buys.

View The Five Stocks Here

Thomas Hughes

About Thomas Hughes

Contributing Author: Technical and Fundamental Analysis

Thomas got his start with the markets while working as a Chef. In 2005 a chance invitation to attend the seminar “How To Buy And Sell Your Own Stocks” altered his worldview. Soon trading and stocks consumed his every waking moment to the point of excluding all else. Thomas now enjoys a much different lifestyle engaged in his true passion, uncovering great investments.
Contact Thomas Hughes via email at tmhughes.writeon@gmail.com.
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