Tyson Foods (TSN)

Meat company Tyson Foods (NYSE:TSN) missed Wall Street’s revenue expectations in Q1 CY2025, with sales flat year on year at $13.07 billion. Its non-GAAP profit of $0.92 per share was 12.2% above analysts’ consensus estimates.

Company Overview

Started as a simple trucking business, Tyson Foods (NYSE:TSN) is one of the world’s largest producers of chicken, beef, and pork.

The perishable food industry is diverse, encompassing large-scale producers and distributors to specialty and artisanal brands. These companies sell produce, dairy products, meats, and baked goods and have become integral to serving modern American consumers who prioritize freshness, quality, and nutritional value. Investing in perishable food stocks presents both opportunities and challenges. While the perishable nature of products can introduce risks related to supply chain management and shelf life, it also creates a constant demand driven by the necessity for fresh food. Companies that can efficiently manage inventory, distribution, and quality control are well-positioned to thrive in this competitive market. Navigating the perishable food industry requires adherence to strict food safety standards, regulations, and labeling requirements.

Competitors in protein and packaged foods include Pilgrim’s Pride (NASDAQ:PPC) and private companies Perdue Farms, Sanderson Farms, and Koch Foods.

A company’s long-term sales performance can indicate its overall quality. Any business can have short-term success, but a top-tier one grows for years.

With $53.62 billion in revenue over the past 12 months, Tyson Foods is one of the most widely recognized consumer staples companies. Its influence over consumers gives it negotiating leverage with distributors, enabling it to pick and choose where it sells its products (a luxury many don’t have). However, its scale is a double-edged sword because there are only a finite number of major retail partners, placing a ceiling on its growth. To expand meaningfully, Tyson Foods likely needs to tweak its prices, innovate with new products, or enter new markets.

As you can see below, Tyson Foods’s 1.5% annualized revenue growth over the last three years was sluggish, but to its credit, consumers bought more of its products.

This quarter, Tyson Foods’s $13.07 billion of revenue was flat year on year, falling short of Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to remain flat over the next 12 months. This projection doesn't excite us and indicates its newer products will not lead to better top-line performance yet.

All else equal, we prefer higher gross margins because they make it easier to generate more operating profits and indicate that a company commands pricing power by offering more differentiated products.

Tyson Foods has bad unit economics for a consumer staples company, signaling it operates in a competitive market and lacks pricing power because its products can be substituted. As you can see below, it averaged a 6.7% gross margin over the last two years. Said differently, for every $100 in revenue, a chunky $93.34 went towards paying for raw materials, production of goods, transportation, and distribution.

Tyson Foods produced a 4.6% gross profit margin in Q1, down 2.7 percentage points year on year and falling way short of analysts’ estimates. Zooming out, the company’s full-year margin has remained steady over the past 12 months, suggesting its input costs (such as raw materials and manufacturing expenses) have been stable and it isn’t under pressure to lower prices.

Tyson Foods was profitable over the last two years but held back by its large cost base. Its average operating margin of 1.2% was weak for a consumer staples business. This result isn’t too surprising given its low gross margin as a starting point.

On the plus side, Tyson Foods’s operating margin rose by 3.4 percentage points over the last year, as its sales growth gave it operating leverage.

This quarter, Tyson Foods’s breakeven margin was down 1.6 percentage points year on year. Since Tyson Foods’s gross margin decreased more than its operating margin, we can assume its recent inefficiencies were driven more by weaker leverage on its cost of sales rather than increased marketing, and administrative overhead expenses.

Revenue trends explain a company’s historical growth, but the change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Sadly for Tyson Foods, its EPS declined by 27.6% annually over the last three years while its revenue grew by 1.5%. This tells us the company became less profitable on a per-share basis as it expanded due to non-fundamental factors such as interest expenses and taxes.

In Q1, Tyson Foods reported EPS at $0.92, up from $0.62 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Tyson Foods’s full-year EPS of $3.86 to shrink by 2.9%.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Tyson Foods has shown weak cash profitability over the last two years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 1.9%, subpar for a consumer staples business.

Taking a step back, an encouraging sign is that Tyson Foods’s margin expanded by 1.1 percentage points over the last year. We have no doubt shareholders would like to continue seeing its cash conversion rise as it gives the company more optionality.

Tyson Foods burned through $378 million of cash in Q1, equivalent to a negative 2.9% margin. The company’s cash burn was similar to its $390 million of lost cash in the same quarter last year. These numbers deviate from its longer-term margin, indicating it is a seasonal business that must build up inventory during certain quarters.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Tyson Foods historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 8.1%, somewhat low compared to the best consumer staples companies that consistently pump out 20%+.

Tyson Foods reported $992 million of cash and $9.07 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $3.55 billion of EBITDA over the last 12 months, we view Tyson Foods’s 2.3× net-debt-to-EBITDA ratio as safe. We also see its $202 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We enjoyed seeing Tyson Foods beat analysts’ EBITDA expectations this quarter. We were also happy its EPS outperformed Wall Street’s estimates. On the other hand, its revenue and gross margin missed. Overall, this print was mixed but still had some key positives. The market seemed to be hoping for more, and the stock traded down 2.3% to $59.41 immediately after reporting.

Updated: June 14, 2025 at 10:36 PM EDT

Before deciding whether to buy Tyson Foods or pass, we urge investors to consider business quality, valuation, and the latest quarterly results.

Tyson Foods falls short of our quality standards. To begin with, its revenue growth was weak over the last three years, and analysts don’t see anything changing over the next 12 months. And while its unparalleled brand awareness makes it a household name consumers consistently turn to, the downside is its declining EPS over the last three years makes it a less attractive asset to the public markets. On top of that, its gross margins make it more challenging to reach positive operating profits compared to other consumer staples businesses.

Tyson Foods’s P/E ratio based on the next 12 months is 14.6x. This valuation is reasonable, but the company’s shaky fundamentals present too much downside risk. There are more exciting stocks to buy at the moment.

Wall Street analysts have a consensus one-year price target of $66.10 on the company (compared to the current share price of $55).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.