Tyson Foods Inc. (NYSE: TSN)
Earnings Report
Tyson Foods reported weak earnings Monday morning and the share price is getting slaughtered because of it, opening down just shy of 10% from Fridays close. Even though they posted better revenues than the same period as last year, they still came up short with just 80 cents per share in profits, 10 cents lower than analyst estimates, on $10.01 billion in revenues. One of the main issues why they came up short on earnings was the high cost of beef, a large part of their business, and could have a big impact on their overall performance for 2015 if prices don’t become favorable soon.
“Our beef business suffered from export market disruptions that had an $84 million impact on third quarter results, and we continue to see very high cattle costs at a time when product values and export issues are making it difficult to realize expected revenue levels in this spread business,” Tyson president and CEO Donnie Smith said in a statement Monday morning. Forbes
Based on the impact the beef market is having on the company’s bottom line, Tyson Foods is lowering guidance for the rest of 2015 and is expecting $3.10-$3.20 adjusted earnings per share versus previous guidance of $3.44. Missed earnings combined with lower guidance is never healthy for any stock price, but patient investors may be able to capitalize on these cheaper prices as the market tends to overreact.
TSN Technicals
Before today’s tumble to $39.96, Tyson Foods was up 10.5% for the year but now they have erased all of those gains and even dipped into negative territory. Share prices opened below the 200d SMA on the daily chart and were never able to break it as price action stayed underpressure on the highest volume day for the stock in 2015. The 200d SMA is going to be a major resistance level now and we may even see a few more down days before the buyers step in. Strong support levels look to be in the $38.50 and $37.50 range.
The overall market is historically weak in August so we could see that play against the share price as well. Shareholders will definitely want to keep an eye on the price of beef as the year moves on and if you’re looking to buy into TSN, you may want to look for entries around the major support levels with tight stop losses just below.
About Tyson Foods, Inc.
Tyson Foods, Inc. is a meat protein and food production company. It produces a wide range of fresh, value-added, frozen and refrigerated food products. It operates through the following segments: Chicken, Beef, Pork, Prepared Foods, and International. The Chicken segment handles domestic operations related to raising and processing live chickens into fresh, frozen, and value-added chicken products, as well as sales from allied products. The Beef segment includes operations related to processing live fed cattle and fabricating dressed beef carcasses into primal and sub-primal meat cuts and case-ready products. The Pork segment operates with live markets hogs and fabricating pork carcasses into primal and sub-primal cuts and case-ready products. The Prepared Foods segment manufactures and markets frozen and refrigerated food products and logistic operations to move products through the supply chain. The International segment includes foreign operations related to raising and processing live chickens into fresh, frozen and value-added chicken products. The company was founded by John W. Tyson in 1935 and is headquartered in Springdale, AR. MarketWatch
