Tyson Foods Q3 Preview: Can Shares Retain Strength?

A sector that has displayed excellent relative strength year-to-date is the Zacks Consumer Staples Sector, up a solid 3.8%. Companies within the sector generate revenue in the face of both good and bad economic situations, helping explain why it’s held up so well in 2022.

The table below illustrates the sector’s performance over several timeframes compared to the S&P 500.

Image Source: Zacks Investment Research

A widely-recognized company residing in the sector, Tyson Foods TSN, is slated to release 2022 Q3 results on Monday, August 8th, before the market opens. Tyson is the largest US chicken company that produces, distributes, and markets chicken, beef, pork, and prepared foods.

The company currently carries a Zacks Rank #3 (Hold) with an overall VGM Score of a B. How does the king of protein shape up heading into the print? Let’s take a closer look to find out.

Share Performance & Valuation

Tyson shares have primarily traded sideways throughout 2022, increasing a marginal 0.3% in value and underperforming its Zacks Sector by a fair margin.

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Image Source: Zacks Investment Research

However, over the last year, the story is vividly different. Tyson shares have tacked on a double-digit 26% in value, easily outperforming its Zacks Sector.

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Image Source: Zacks Investment Research

In addition, Tyson sports a beautifully low 9.7X forward earnings multiple, well below its five-year median of 11.7X and nowhere near its Zacks Sector average of 21.0X.

The company boasts a Style Score of an A for Value.

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Image Source: Zacks Investment Research

Quarterly Estimates

Analysts have had mixed reactions for the quarter to be reported over the last 60 days, with one upward and one downward estimate revision. Furthermore, the Zacks Consensus EPS Estimate of $1.91 reflects a steep 30% decline in earnings year-over-year.

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Image Source: Zacks Investment Research

However, the company’s top-line is projected to register solid growth – the Zacks Consensus Sales Estimate for the quarter of $13.3 billion pencils in a 6.6% uptick from year-ago quarterly sales of $12.5 billion.

The most obvious answer for the decline in earnings can be attributed to soaring product costs, massively impacting margins.

Quarterly Performance & Market Reactions

As of late, TSN’s bottom-line results have been incredible, with the company chaining together eight consecutive bottom-line beats. Just in its latest quarter, the protein king registered a solid 25% double-digit EPS beat.

Top-line results have also been stellar as of late, with the company exceeding quarterly revenue estimates in each of its previous five prints.

Tyson Foods – Quarterly Revenue

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Image Source: Zacks Investment Research

In addition, day-traders who play the long side will appreciate this – shares have moved upwards following each of the company’s previous five quarterly reports.

Putting Everything Together

Tyson shares have displayed incredible relative strength year-to-date and over the last year. In addition, the company sports attractive valuation levels relative to its Zacks Sector.

The king of protein’s earnings are forecast to decline significantly, but the top-line looks to register solid growth – a reflection of rising costs and margin compression.

Furthermore, top and bottom-line results have been repeatedly reported above expectations as of late.

Heading into the print, Tyson Foods TSN carries a Zacks Rank #3 (Hold) with an Earnings ESP Score of 4.1%.

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Each was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2021. Previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.

Most of the stocks in this report are flying under the Wall Street radar, which provides a great opportunity to get in on the ground floor.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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