Bear Of The Day: Tyson Foods

Tyson Foods (TSN) is a processor and marketer of chicken, pork, and beef. The company has been struggling due to high inflation and low pricing power for its product offerings. Tyson Foods has witnessed elevated input costs and has been dealing with weak margins for several quarters. Weakness in the consumer staples sector has also contributed to poor stock performance.

A member of the S&P 500, Tyson Foods manufactures and markets its products under recognized brand names such as Jimmy Dean, Hillshire Farm, and Ball Park. The company sells its products in more than 80 countries through its sales staff to grocery retailers and wholesalers, meat distributors, chain restaurants, convenience stores and hospitals. Tyson Foods was founded in 1935 and is headquartered in Springdale, AR.


The Zacks Rundown

TSN stock is a Zacks Rank #5 (Strong Sell) and is a component of the Zacks Food – Meat Products industry group, which ranks in the bottom 9% out of more than 250 Zacks Ranked Industries. As such, we expect this industry group as a whole to underperform the market over the next 3 to 6 months, just as it has over the course of the year:

(Click on image to enlarge)

Zacks Investment Research

Image Source: Zacks Investment Research

Candidates in the bottom tiers of industries can often be potential short candidates. While individual stocks have the ability to outperform even when included in a poorly-performing industry group, the inclusion in a weaker group serves as a headwind for any potential rallies and the journey forward is that much more difficult.

Despite the underperformance this year, stocks in this group remain relatively overvalued:

Zacks Investment Research

Image Source: Zacks Investment Research

As a part of this group, TSN stock has experienced considerable volatility in 2023. Shares recently touched a 52-week low even as the market has bounced off the September lows.


Recent Earnings Misses and Deteriorating Outlook

TSN has fallen short of earnings estimates in each of the last four quarters. The food company most recently reported fiscal third-quarter earnings back in August of $0.15/share, missing the $0.34/share consensus EPS estimate by 55.9%. Earnings plunged 92.3% from the same quarter in the prior year.

Tyson Foods has missed earnings estimates by an average of 50.5% over the past four quarters. Consistently falling short of earnings estimates is a recipe for underperformance, and TSN is no exception.

The company has been on the receiving end of negative earnings estimate revisions as of late. For the current fiscal year, analysts have decreased estimates by 3.79% in the past 60 days. The fiscal 2023 Zacks Consensus EPS Estimate now stands at $1.27/share, translating to negative growth of -85.5% relative to last year.

Zacks Investment Research

Image Source: Zacks Investment Research

Falling earnings estimates are a huge red flag and need to be respected. Negative growth year-over-year is the type of trend that bears like to see.


Technical Outlook

As illustrated below, TSN stock is in a sustained downtrend. Notice how shares have plunged below both the 50-day and 200-day moving averages signaled by the blue and red lines, respectively. The stock is making a series of lower lows, with no respite from the selling in sight. Also note how both moving averages have rolled over and are sloping down – another good sign for the bears.

(Click on image to enlarge)


Image Source: StockCharts

While not the most accurate indicator, TSN stock has also experienced what is known as a ‘death cross’, wherein the stock’s 50-day moving average crosses below its 200-day moving average. Tyson Foods would have to make a serious move to the upside and show increasing earnings estimate revisions to warrant taking any long positions in the stock. TSN shares have fallen more than 24% in the past year alone. 


Final Thoughts

A deteriorating fundamental and technical backdrop show that this stock is not set to hit new highs anytime soon. The fact that TSN is included in one of the worst-performing industry groups provides yet another headwind to a long list of concerns. A history of earnings misses will likely serve as a ceiling to any potential rallies, nurturing the stock’s downtrend.

Shares continue to experience substantial volatility and have widely underperformed this year. With negative earnings estimate revisions continuing to pile up, this stock should be avoided as there are plenty of better alternatives in the current market environment.

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Disclosure: contains statements and statistics that have been obtained from sources believed to be reliable but are not guaranteed as to accuracy or completeness. References to any specific ...

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