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Meat & Protein

Market Not Impressed by Tyson's Chicken Reform

May 7, 2024 - Matthijs Bremer

The second quarter of Tyson Foods' fiscal year 2024 is sending mixed signals. By significantly cutting back on the chicken department, the company has managed to turn its results around positively. However, the market is not impressed.

Yesterday (Monday, May 6), the stock closed 5.5% lower than the weekend at $58.42. At its lowest point, the meat giant's stock was down as much as 9% yesterday.

Tyson's performance cannot be considered really bad. The company's profit increased to $312 million. In the second quarter of 2023, the company reported a loss of $49 million. Particularly, the performance of the chicken department has improved significantly over the past year. In the second quarter of 2023, the department made a profit of $158 million. A year earlier, the chicken section lost $258 million.

Substantial reorganizations were necessary for this improvement. In total, the company closed six processing facilities in five states to streamline production. The company states that it is clearly on the right track and expects further recovery for the rest of the year. Based on the results, Tyson has set a profit expectation for fiscal year 2024 between $1.4 billion and $1.8 billion.

Lower Revenue
The result may seem mainly positive at first glance, but in practice, investors are not impressed. The reason for Tyson's stock decline lies in a significant drop in revenue from the chicken meat division. The closure of processing facilities led to a 6.1% decrease in sales volumes, resulting in an 8.4% revenue decline from $4.43 billion to $4.06 billion.

The significant reduction in chicken meat production is mainly due to the broader macroeconomic perspective. It is reported in the American media that meat consumption is still under pressure due to inflation in recent years. CEO Donnie King expressed to shareholders that Tyson is not immune to macroeconomic developments.

Expectations
Furthermore, the stock decline is also a result of high expectations. Tyson's revenue in the second quarter amounted to $13.07 billion, which is lower than market expectations. On average, analysts expected revenue of $13.16 billion, according to Factset data.

Matthijs Bremer

Matthijs Bremer is a market specialist in pork, beef, and poultry meat at DCA Market Intelligence. He also monitors the protein transition, keeping an eye on developments in cultured meat and meat substitutes.
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