Tyson Earnings: Significant Cost Pressures Plague Profitability, but Impact Should Be Short-Lived

Our $103 per share valuation of no-moat Tyson should fall by a high-single-digit percentage in the wake of its second-quarter earnings announcement, which included significant profitability pressure borne of high costs and sluggish demand. Our reaction is more muted than the shares’ midteens percentage plunge, likely because we view the strain as transitory, a consequence of a volatile cost and pricing environment. We do not plan large changes for our long-term outlook (low-single-digit annual percentage revenue growth, mid-single-digit adjusted operating margins). With prevailing sentiment apparently fixated on current-market dynamics, the shares seem attractive for long-term investors willing to shoulder near-term volatility.