Skip to main content

Earnings from Tyson Foods and JBS show each company’s beef business suffering from thinning margins. These cost pressures, induced by a shrinking cattle herd in the US, could linger an create a drag on 2024 sales at the companies. COVID-19 lockdowns, persistent drought, and the mass culling of beef cows that resulted from those factors, helped live cattle futures record a record run from March 2020 to September of this year, throttling profitability among beef producers. Input costs are finally beginning to subside a bit, suggesting beef processors margins could be set to improve. However, if falling futures prices for cattle are a result of softness on the demand side, further pressure on sales and profitability may lie ahead.

Related ETF & Stocks: Invesco DB Agriculture Fund (DBA), Tyson Foods, Inc. (TSN), JBS S.A. (JBSAY)

Tyson Foods surpassed analyst estimates regarding the company’s earnings per share (EPS) in Q4 of the company’s fiscal year 2023, reporting EPS of $0.37 versus expectations of just $0.25, according to MarketBeat data. Those earnings were cut by more than three quarters from an EPS of $1.63 reported in the same period one year ago. Revenue fell by a much smaller proportion, down just -2.8% YoY, but sales in the year ahead period are now forecast to stagnate near 2023’s $52.88 billion. Tyson further disclosed the shuttering of two processing plants related to its chicken business, as well as hundreds of layoffs resulting from those shutdowns, bringing the total number of its chicken facility closures to eight in 2023. Tyson’s shares shifted lower throughout Monday’s trading session on these results.

Though the chicken business has suffered this year, that segment is likely to get some relief next year and swing back into operating profitability. However, Tyson’s beef business – the largest segment in the company – is raising significant concerns, swinging to a loss in the prior quarter for the first time since 2015. Moreover, Tyson booked a -$333.0 million goodwill impairment on its beef business amid “unfavorable macroeconomic conditions” and higher interest rates, and projected a loss of as much as -$400.0 million for its beef operations for the fiscal year 2024.

Beef producers have languished under surging cattle prices throughout the year. Futures tied to live cattle touched an all-time high above $1.90/lb in September, easily surpassing the previous peak of…

To read the complete Intelligence Briefing, current All-Access clients, SIGN IN

All-Access clients receive the full-spectrum of MRP’s research, including daily investment insights and unlimited use of our online research archive. For a free trial of MRP’s All-Access membership, or to save 50% on your first year by signing up now, CLICK HERE