Tyson Earnings: Macro Pressure Continues, but Market Overlooks Sequential Improvement; Shares Cheap

We don’t anticipate changing our $85 per share fair value estimate for no-moat Tyson after reviewing its preliminary fiscal third-quarter earnings release. Shares were down 4% after the report as the market focuses on continuing weak profitability across many of Tyson’s businesses on a year-over-year basis. However, we think this view overemphasizes near-term earnings projections and overlooks sequential improvement. We do not see any structural changes to its end markets that would alter our long-term outlook for low-single-digit percentage annual revenue growth and a return to mid- to high-single-digit adjusted operating margins. Shares trade significantly below our fair value estimate and offer an attractive risk-adjusted upside as well as a 3.4% dividend yield.