Neszed-Mobile-header-logo
Thursday, October 9, 2025
Newszed-Header-Logo
HomeFood & DrinkFor Tyson, Investors Worry About More Than Just the Industry

For Tyson, Investors Worry About More Than Just the Industry

In fiscal 2015, Tyson Foods posted revenue of just over $40 billion, and adjusted operating income of $2.25 billion. In fiscal 2025, analysts expect sales to near $55 billion – yet profits are expected to actually come in below where they were ten years earlier.

The question for investors – and for Tyson itself – is why earnings have stagnated. The explanation from Tyson management, unsurprisingly, is that the external environment is the problem.

At a conference last month, COO Devin Cole made that case. He argued that profit growth over fiscal 2024 (and FY23) was driven by “our own operational excellence,” thanks to more efficient marketing spend and share gains in prepared foods.And Cole’s argument makes some sense.

Tyson has been hit hard by a perfect storm in its beef business.

Drought conditions lowered herd levels; record-high prices have lowered heifer retention and further decreased supply. Tariffs on Brazilian imports and the New World screwworm have only made matters worse. With plant utilization down, the segment has turned sharply unprofitable: Tyson is guiding for an operating loss around $400 million for the fiscal year.

But in the rest of the business, the news is much better. Chicken demand remains healthy, and Tyson is benefiting from a cyclical reduction in feed costs.

Tyson’s smaller pork business is holding up, but management sees real potential for the prepared food business. That segment has increased profits by over 50% over the last decade, or about 4% annualized growth. That rate is not necessarily spectacular, but it does suggest outperformance relative to many traditional manufacturers.

CEO Donnie King has argued that operating margins in the segment could clear 10% and then some, as operational efficiencies continue and investments behind the business this year pay off.

So there is a story to tell – indeed, it is the story that Tyson management is telling – in which the business actually is in great shape.  The key problem is beef. And yet that’s not a story the stock market believes at the moment.

Tyson shares trade at barely 14x this year’s earnings. That’s a relatively low multiple for a business with a key segment at the bottom of the cycle. In theory, beef profits will return (though management sees at least another difficult year ahead) and that alone can drive significant earnings growth. Just getting the beef segment to breakeven, all else equal, would increase overall net profit by about 30%.

That multiple is in line with the high end of Tyson’s range, which itself gets to a core problem here: investors simply aren’t that interested in the stock. That’s despite the fact that there’s a relatively easy case for owning the stock here. Prepared foods is a strong business with a multi-year track record of growth. That category is obviously attractive given that fellow processor Smithfield itself has successfully grown its own prepared foods business.

Chicken demand looks consistent, particularly on the foodservice side where quick-service and fast-casual chains continue to push the product – and the chicken sandwich wars continue.

Broader protein demand looks strong; GLP-1 usage shouldn’t affect Tyson’s categories, and many consumers may even choose higher-protein diets.

A recent launch of “Chicken Cups” aims to target high-protein snackers. On the whole, this looks like at worst a solid business once the beef cycle turns.

And yet investors aren’t paying much for that business: assuming beef simply gets to breakeven, Tyson trades at a little over 10x earnings. That’s a multiple that for most companies implies basically zero growth going forward.

Here, too, the question is why. Likely part of the issue is the cyclical nature of Tyson itself; the market historically has priced those stocks at a discount, simply because earnings are so volatile. Tyson itself generated adjusted earnings per share of $8.73 in fiscal 2022 and just $1.34 the next year. That inconsistency on its own suppresses demand for the stock.

But it’s fair to wonder if that optimistic management is part of the problem. At the September conference, an analyst congratulated Cole on his promotion to COO. But that promotion came because Cole took over duties from the former head of supply chain, who was dismissed for unspecified violations of company policy.

Last year, CFO John R. Tyson – the great-grandson of the company’s founder, who was hired to the job at just 32 – was suspended and eventually dismissed after his second alcohol-related arrest in two years.

There are questions about management. And as we noted three years ago, even accounting for industry challenges, Tyson often has underperformed its peers. Even now, while Tyson’s prepared foods business has done well, it looks like Smithfield has done a better job taking share and improving margins.

Tyson doesn’t have much room for error, and in recent years it’s had to navigate historic disruptions in pretty much every facet of its business.

But at this point, with normalcy returning, one might expect investors would be rushing back into the stock. The fact that they aren’t, and that Tyson shares are trading where they did back in 2016, suggests that the market sees more reason for caution than just a downturn in the beef business.

About the author: Vince Martin is an analyst and author whose work has appeared on multiple financial industry websites for more than a decade; he’s currently the lead writer for Wall Street & Main. He has no positions in any securities mentioned.


Food for Thought Leadership

In this episode of Food for Thought Leadership, The Food Institute’s Rebecca Fryer sits down with Dr. Deepali Palta, vice president of Global R&D, Innovation, and Sustainability at Kellanova, for a deep dive into the science, strategy, and spirit driving the next generation of food innovation.

Source link

RELATED ARTICLES

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Most Popular

Recent Comments