Tyson Foods TSN fiscal Q4 report was much looked to for insights into the larger food industry and how wholesalers will be able to perform amid rising inflation and economic downturn. As more consumers stick to the essentials, food consumption is expected to hold up better than other areas of consumer spending.

Let’s see what’s going on with Tyson Foods after earnings.

Q3 Results

Historically investors have sought out food companies like Tyson Foods during challenging economic times and market uncertainty for defensive protection. Unfortunately for TSN stock, this has not been the case. Investors were hoping a strong fiscal Q4 report could give a boost to TSN’s performance this year.

Tyson stock has actually lost momentum this week, down roughly -3% since reporting. The nearby chart shows that industry competitor Hormel Foods HRL has climbed over the last year and acted more defensive, while TSN shares have lagged the S&P 500.

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In its fiscal Q4 results, TSN missed earnings expectations by -4% with EPS of $1.63. This represented a -29% YoY drop from Q4 2021 and a -16% decline from the previous quarter. The company was able to beat top line expectations with sales of $13.73 billion. This was up 7% from a year ago and 2% from the previous quarter.

The company delivered record sales and earnings for the full year, which CEO Donnie King attributed to a diverse portfolio and continued strength in consumer demand for protein. Another highlight of the quarter was Tyson Foods’ improvement in its chicken segment with chicken supply previously one of the biggest issues facing the company.

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Chicken segment sales jumped 19% YoY, with chicken prices up 18%. This boosted the chicken segment’s operating income to $340 million compared to a loss of -$136 million in Q4 2021. However, total operating income was down -60% at $766 million compared to $1.90 billion in the prior-year quarter.

The decline is mostly attributed to a hard to follow record year in beef sales. However, earnings estimate revisions for TSN have continued to trend down following the report. The company gave guidance for FY23 sales between $55-$57 billion, with the Zacks Estimate at 54.04 billion.

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The United States Department of Agriculture’s (USDA) outlook for FY23 also indicated domestic protein production (beef, port, chick, and turkey) should decrease by 1% compared to fiscal 2022 levels. It is important to note this could affect supply and raise costs for the broader industry with competitor Hormel Foods seeing declining earnings estimates as well.