Analysts predict that Tyson Foods' third quarter 2019 profit will be lower than 2018's, in part because of rising operating costs and sluggish demand.
Tyson is scheduled to release its quarterly earnings report Monday.
Analysts with Stephens Inc. recently lowered their adjusted earnings estimates for Tyson by 1 cent to $1.42 per share. That's down from $1.47 a year ago and adjusted earnings of $1.50.
That is lower than Wall Street's adjusted estimates of $1.47 for Tyson's 2019 third quarter, a FactSet consensus shows.
"We remain positively inclined on the sector despite the fact that the stocks have taken a bit of a breather following each of the company's most recent earnings reports, given rising feed costs and slower-than-expected [African swine fever]-related demand," said Stephens analyst Ben Bienvenu in a research brief.
Stephens also estimated Tyson's sales to be higher for the quarter that ended June 30 than a year ago. It estimates sales of $10.7 billion, a 6.5% climb from $10.05 billion.
While protein price inflation has been slow to start, given the global hog shortage, increases should occur in the three months ending Dec. 31, Bienvenu said in the brief.
Chicken pricing, in general, has been weaker than expected but remains steady, Bienvenu said. Wings and leg quarters are expected to perform better than in last year's quarter, while boneless breasts won't. Some input cost inflation is expected to take place in Tyson's prepared foods segment, he said. He also expects Tyson's pork profits to be squeezed because of demand uncertainty, and for beef to continue being profitable.
Feed costs have increased since early May. However Tyson has enough feed supply on hand to avoid eating into fiscal 2019 profits, according to Stephens.
Meanwhile, competitor Pilgrim's Pride topped analysts' expectations for its second quarter, rebounding from last year's mixed second quarter thanks to increased poultry demand. With less available pork on the market came less competition, which strengthened the company's business in Mexico.
Mexico sales climbed 4% to $390 million from a year ago. By comparison, U.S. sales rose less than 1% from last year to $1.9 billion, and sales in Europe fell almost 5% to $535 million because of feed cost challenges.
Pilgrim's Pride reported earnings per share of 68 cents, higher than Stephens' estimate of 67 cents and a consensus estimate of 65 cents.
Both Tyson and Pilgrim's Pride are, or have been, clients of Stephens within the past 12 months. Stephens also owns common stock with both companies.
Shares of Pilgrim's Pride have almost doubled since the first of the year. They fell 18 cents, or less than 1%, to close Friday at $29.12.
Tyson's shares fell 63 cents, or less than 1%, to close Friday at $79.76. They have risen almost 50% since the start of the year.
Tyson will hold a conference call at 8 a.m. Monday to discuss the earnings report, the company has told investors. It can be accessed on Tyson's investor website or by dialing (844) 890-1795.
Business on 08/03/2019