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Tyson Set to Profit From Swine Fever Though Timing Uncertain

Published 06/05/2019, 13:42
Updated 06/05/2019, 14:46
© Reuters.  Tyson Set to Profit From Swine Fever Though Timing Uncertain
TSN
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(Bloomberg) -- Tyson Foods Inc (NYSE:TSN). says it’s poised to take advantage of a hog disease in China that’s set to transform the global protein industry, although it can’t say for sure when those benefits will start or how big they’ll be.

In an earnings release Monday, the top U.S. meat processor kept its previous guidance because of the uncertainty over when African swine fever impacts could occur.

Key Insights

  • Tyson sees swine fever as having “the potential to impact the global protein industry on a level that we have never experienced.”
    • Any impacts probably will occur in late fiscal 2019 to fiscal 2020 and beyond, as pork prices aren’t currently keeping pace with hog costs.
  • Still, “chicken margins disappointed, and this is a key focus for investors,” said Heather Jones, managing director at The Vertical Group.
  • While Tyson’s chicken business is set to benefit indirectly from China’s woes as consumers there look for cheap protein alternatives, higher pork prices may squeeze margins in Tyson’s pork and prepared foods segments given the company buys hogs.
  • Beyond swine fever, the company delivered a sales forecast that exceeded the average estimate and also beat on quarterly earnings. Tyson has invested in prepared foods and value-added items and expanded overseas. That’s been helping cushion it from high pork and chicken supplies and costs.

Market Reaction

  • Tyson shares were down 2.1 percent at 8:39 a.m., before the start of regular trading in New York, in a market-wide selloff fueled by trade-war concerns. The stock has gained 41 percent this year as part of a rally by protein producers.
  • Some investors expected raised guidance, and President Donald Trump’s recent tariff threats are likely pressuring shares, according to Jones.

Get More

  • For more details on the results, click here.

(Adds analyst comments in second, seventh bullets.)

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