Tyson Foods CEO on growth potential for chicken 'in challenging economic times'
Tyson Foods (TSN) sees chicken as a bright spot as it looks to prevail through challenging macroeconomic conditions.
In an exclusive interview, Tyson Foods CEO Donnie King told Yahoo Finance over the phone that historically, "chicken is the place" to be "in challenging economic times," as consumers gravitate towards cheaper and healthier protein options.
"We're in a position to be able to meet that demand and to be able to grow with our customers," he added.
The meat producer reported its fiscal Q4 results on Monday. Its $13.3 billion revenue missed Wall Street's target of $13.7 billion, while its earnings per share of $0.37 beat expectations of $0.25. Shares closed 3% lower after the mixed results.
Its chicken, prepared foods, and international business saw volume growth in its Q4 results, while beef and pork volumes declined.
Prices for chicken dropped 9.2%, compared to analyst expectations of 3.96%. But beef prices jumped 10.2% due to a slower-than-expected cattle supply recovery.
'Chicken will be the protein of choice': CEO
Amid sticky inflation and high grocery prices, consumers are being more mindful of what they're spending on, and swapping around to different proteins and package sizes.
"We're seeing some ... trade around ... from beef to pork or to chicken," said King. While he expects more of that behavior, he said the swap is not as widespread as during the Great Recession of 2008 to 2009.
Consumers aren't trading down to private label over Tyson either, but they are opting to buy smaller packets over larger-size packs, according to King.
Chicken tends to come out on top, though, when wallets are pinched.
"Not only domestically, but globally, chicken will be the protein of choice for those consumers that are looking for lean, healthy protein and affordable prices," said King.
This uptick in poultry volume comes after the company made a decision to shutter three chicken-processing plants last month, including facilities in North Little Rock, Ark.; Noel, Mo; and Dexter, Mo. The fourth location — in Corydon, Ind. — will close on or around March 1, 2024. That's in addition to two other closures earlier this year.
King said the closures have provided some boost in capacity utilization of their facilities, as well as a better cost structure. The company plans to open two new plants for Tyson brand chicken products and its prepared foods brands Wright and Jimmy Dean. Prepared foods, like sausage patties and bacon, will be another key growth opportunity for Tyson, per King.
In fiscal 2024, Tyson Foods expects adjusted operating income (AOI) of $400 million to $700 million for its chicken segment. Pork's AOI is expected to break even, but beef AOI is expected to be a loss of $400 million to break even, as a slow recovery in US cattle supply has driven up prices.
Tyson Foods is right to stay conservative in its guidance, JPMorgan analyst Ken Goldman said in a note to clients. "We believe the company wants to avoid another 2023 when every major factor (revenue, almost every segment’s margin, etc.) came in lower than initially expected."
The firm plans to "stay on the sideline" with a Neutral rating, adding "we want to see a bit more of a linear, positive trajectory in fundamentals before feeling that guidance is beatable by a meaningful degree."
Tyson Foods has also been monitoring the potential impact of diabetes and weight loss drugs, also known as GLP-1s. So far, the company has not seen any impact, but it could end up benefitting the meat manufacturer.
"The hidden gem in here, lean protein can play a role in any healthy diet, so changes to more healthier eating could be a nice tailwind to us in our protein portfolio," said King.
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Brooke DiPalma is a senior reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at bdipalma@yahoofinance.com.
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