Tyson Foods Inc. (TSN) is set to report the fourth-quarter and full-year fiscal 2014 results on Nov 17. Last quarter, the company delivered a negative surprise of 9.6%. Let's see how things are shaping up for this announcement.
Factors to Consider
Tyson’s continuous product innovation and strong momentum in most of its business segments has helped it to post modest gains in earnings and revenue over the past few quarters.
The Chicken segment has gained momentum following the shift of demand from high-calorie red meat toward more healthy chicken products. Moreover, fall in the price of corn, the most important feed of chicken, over the past few quarters has lowered the company’s input cost, thus resulting in improved profitability.
Moreover, the beef and pork segments have been producing higher revenues backed by positive pricing. The strong top-line momentum of the company is expected to continue in the fourth quarter as well.
However, skyrocketing input prices are posing a threat to the company. Although corn prices are at record low, higher cattle prices have lowered the operating margins and volumes in the Beef segment over the past few quarters. Currently, per USDA data, beef prices have hit the highest level in almost three decades. These are expected to affect margins negatively during the fourth quarter.
Earnings Whispers?
Our proven model does not conclusively show that Tyson Foods is likely to beat earnings this quarter. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 to surpass earnings estimates. However, that is not the case here due to the following factors:
Zacks ESP: ESP for Tyson is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at a loss of 83 cents.
Zacks Rank: Tyson has a Zacks Rank #2 (Buy), which when combined with a 0.00% ESP makes surprise prediction difficult.
We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Stocks to Consider
Here are some companies that investors may want to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:
Best Buy Inc. (BBY), with an Earnings ESP of +4.17% and a Zacks Rank #1 (Strong Buy).
Foot Locker Inc. (FL), with an Earnings ESP of +1.28% and a Zacks Rank #3 (Hold).
The J. M. Smucker Company (SJM), with an Earnings ESP of +1.21% and a Zacks Rank #3.
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