Tyson Foods, Inc. (TSN Quick QuoteTSN – Free Report) posted impressive results for the third quarter of fiscal 2021, with both top and bottom results increasing year over year. Both sales and profits exceeded Zacks’ consensus estimate.

The performance of the company in the reported quarter reflects sales growth in all segments. The company continued to experience robust growth in retailing, while its restaurant business rebounded as the restaurant industry began to reopen. The company’s beef sector increased production to meet strong American and international demand for higher quality items.

Quarter in detail

Adjusted earnings came in at $ 2.70 per share, beating Zacks’ consensus estimate of $ 1.77. Net income jumped 93% year-on-year.

Total sales were $ 12,478 million, an increase of 24.5% from the $ 10,022 million reported in the same quarter last year. The top line topped Zacks’ consensus estimate of $ 11,198.8 million. Gains from the average price change were 17.1%, while total volumes increased 9.7%.

Gross profit for the quarter was $ 1,620 million, compared to $ 1,313 million reported in the prior year quarter. Gross margin, as a percentage of sales, was 13%, down from 13.1% reported in the previous year quarter. Tyson Foods adjusted operating income increased 81% to $ 1,372 million. In addition, the adjusted operating margin fell from 7.6% to 10.8% during the quarter.

During the quarter, the company incurred nearly $ 55 million in direct additional expenses associated with COVID-19, which put pressure on results to some extent. These include costs for team members, disinfection of production facilities, coronavirus testing, donations, product downgrades, returned products, and certain professional fees. In addition to these factors, the indirect costs of COVID-19 included expenses associated with raw materials, transportation, underutilization and reconfiguration of the plant, bonuses offered to cattle ranchers and price discounts.

Segment details

Beef: Segment sales increased to $ 4,954 million from $ 3,653 million reported in the same quarter last year. Volume improved by 24% thanks to strong global demand and lower year-over-year production inefficiencies linked to the pandemic. The average price increased 11.6% on strong demand for beef products.

Pork: Segment sales increased to $ 1,715 million from $ 1,115 million reported in the last year quarter. Sales volume increased 14.5% on strong global demand and lower year-over-year production inefficiencies linked to the pandemic. The average price increased 39.3% due to strong demand.

Chicken: Segment sales increased to $ 3,476 million from $ 3,112 million in the prior year quarter. Sales volume increased 3.3%, mainly due to higher demand in the foodservice channel and lower year-over-year production inefficiencies related to the pandemic. The average price increased 15.6% due to a favorable sales mix and inflationary market conditions.

Prepared Foods: Segment sales increased to $ 2,323 million from $ 2,035 million reported in the prior year quarter. Prepared food sales volume increased 4.5%, primarily due to higher demand in the foodservice channel as well as sustained retail demand. The lower year-over-year production inefficiencies linked to the pandemic have also led to the rise. The average price increased 9.7% due to a favorable product mix and the pass-through of higher raw material costs.

International / Other: Sales in the segment were $ 488 million, compared to $ 402 million reported in the same quarter last year. Sales volume increased 1.8%, while the average selling price jumped 19.6%.

Other financial updates

The company ended the quarter with cash and cash equivalents of $ 1,613 million, long-term debt of $ 8,786 million and total equity (including non-controlling interests) of 16 $ 693 million. For the first nine months ended July 3, 2021, cash flow from operating activities was $ 2,656 million.

Liquidity was approximately $ 3.4 billion as of July 3, 2021. Management expects liquidity to remain above the company’s minimum target of $ 1 billion. The company is forecasting capital expenditures of nearly $ 1.3 for fiscal 2021.

Outlook

Management expects sales to be in the $ 46 billion to $ 47 billion range in fiscal 2021. Previously, the company had forecast the metric in the $ 44 billion to $ 46 billion range. For fiscal year 2021, the United States Department of Agriculture (“USDA”) expects domestic production of protein (chicken, beef, pork and turkey) to increase by less than 1% from previous levels. Fiscal 2020 levels. On an adjusted basis, the company expects its prepared food unit to remain stable in Fiscal 2021 year over year. Pork segment is expected to remain below FY2020 levels. Beef segment is expected to perform better in FY2021 compared to FY2020 levels. Chicken unit is expected to perform below FY2021. for fiscal year 2021.

Image source: Zacks Investment Research

Sector orientation for fiscal year 2021

For the beef segment, the USDA predicts that domestic production will increase nearly 3% year-over-year in fiscal 2021. For pork, domestic production is expected to stagnate year-on-year. the other, according to the USDA. In addition, the USDA predicts that domestic production in the chicken segment will decline by less than 1% in fiscal 2021. For the prepared foods segment, the company continues to focus on responding to developments. consumer behavior and rising costs. The company expects better results from its operations in the International / Other segment.

Shares of this company Zacks Rank # 3 (Hold) have gained 10.4% so far this year compared to the industry’s 4.3% rise.

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