7 February, meat maker Tyson Foods released its first quarter 2022 report. The company raised prices and successfully passed its costs on to consumers.. By the end of the day, TSN shares rose by 12%, to 99 $.
Sales and forecast
Compared to the first quarter of 2021, Tyson Foods sales grew by 23,6%, up to $12.9 billion. Sales volume remained almost unchanged +0,3%, - but the prices have grown on average by 19,6%.
And here is how sales of each type of meat have changed over the year:
- beef - $5 billion (+25,5%), volume - -6.2%, price - +31,7%;
- chicken - $3.9 billion (+37,4%), volume - +3,6%, price - +19,9%;
- pork - $1.6 billion (+13%), volume - +0,2%, price - +12,8%.
According to the company, demand for meat is still high, but due to a shortage of workers and supply disruptions, it is difficult for her to increase sales. For the same reasons, Tyson Foods is forced to constantly raise prices., that is, to shift their growing costs to consumers.
Food is a recession-resistant industry. Companies like Tyson Foods can almost painlessly raise prices and remain profitable during difficult times..
But there is also a drawback to this approach.. For example, possible attention from regulators. Tyson Foods and three other major meat producers control 85% US beef market. President Joe Biden concerned about record 40 years of price increases, which means, the administration can begin to regulate pricing in such an oligopoly.
According to company forecasts, in 2022, total sales will be about $50 billion 6% more compared to 2021.
Profitability and profit
Tyson Foods is trying to maintain margins not only through prices. The company recently launched a cost reduction program. So, in 2022, she expects to save 300-400 million dollars, in 2024 - a billion.
In the meantime, prices are helping Tyson Foods increase its operating margin., which almost doubled year on year, with 6,7 to 11,3%. Operating income and net earnings per share increased by 106 and 140%.
These figures were affected by various non-operating items, e.g. legal fees, which means, it is better to look at the adjusted values. Here's how they've changed in a year:
- operating margin increased from 9,5 to 11,1%;
- operating profit increased by 40%, up to $1.4 billion;
- net earnings per share increased by 48%, to 2,9 $.
Promotions
Since the beginning of 2022, stock indices S&P 500 and Nasdaq lost 6 And 11% against the background of the sale of technology stocks. But this is unlikely to worry Tyson Foods shareholders much., whose shares have risen by 14% and updated the historical maximum. It is precisely belonging to the security industry and the low cost of the company that help save investors' nerves.
