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Goldman Sachs’ enthusiasm for Tyson Foods has cooled. Analyst Adam Samuelson downgraded the food maker from Buy to Neutral after Tyson’s latest quarterly report showed significant underperformance across the company, especially in the chicken segment. The company reported earnings per share of 85 cents for its fiscal first quarter, well below StreetAccount’s consensus estimate of $1.21 per share. “Essentially, the results showed a sharp decline in profitability across the organization, especially at Kurin, undermining our confidence that the cumulative effect of recent operational and strategic changes can boost the company’s margins and earnings,” Samuelson wrote in a note to clients in Monday. “Combinedly, we see a more uncertain profitability trajectory for the chicken segment in FY24 and are less confident that the business will return to the previously announced normalized margin of 6-8%,” the analyst added. Goldman Sachs cut its target price to $66 per share from $91. The new target suggests upside potential of around 8% from Monday’s close. Samuelson noted that he previously expected more severe headwinds in the chicken market, primarily higher feed costs and lower prices for commercial poultry. These hurdles could be offset over time through changes such as investment in automation, further processing of the blend and cost-based pricing models, he says. “TSN management attributed the shortfall to higher overall domestic protein availability and specific surpluses of TSN retail packaging for trays that needed to be diverted to higher merchandising channels at significantly less favorable selling prices,” the analyst wrote. “Significantly, however, TSN’s own significant increase in domestic production (+15% yield vs. +2.5% segment sales) represents a disproportionate share of the industry’s growth,” added Samuelson. “As TSN domestic harvest growth this year will remain well above the industry average, the importance of accurately forecasting TSN demand across channels to avoid similar short-term assortment pressures in the future will only increase in our view, and with it execution. risk”. The company also reported weaknesses in the beef and pork segments. The US meat industry is expected to experience a sharper decline in livestock slaughter and capacity utilization, which will also exacerbate Tyson’s lower revenue forecasts. Tyson shares fell 4.6% on Monday after the company posted quarterly earnings. Shares have fallen nearly 39% over the past 12 months. TSN 1Y Mountain TSN over the past 12 months – Michael Bloom of CNBC
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