JBSAY - Tyson JBS slip after Cargill profit warning

2023-04-14 12:08:37 ET

A report indicating slowing profits from global food giant Cargill had an impact on publicly-traded peers on Friday.

According to Bloomberg , net income for America’s largest privately-held company fell from $6.7B in the year-ended on May 31, 2022 to $3.2B in the first 9 months of the following fiscal year. Revenue, meanwhile, fell to $133.5B from $165B over the same period. The trends were presented to bondholders in documents obtained by the outlet.

The warning on meat industry margins appeared to impact publicly traded peers, such as Tyson Foods ( NYSE: TSN ) and JBS SA ( OTCQX:JBSAY ), each of which moved about 1.8% lower on Friday.

Both stocks also received new initiation notes at BMO Capital Markets to close the week. While JBS ( OTCQX:JBSAY ) attracted a Buy-equivalent rating, Tyson ( TSN ) was started at Hold. Equity analyst Andrew Strelzik expects JBS to see more robust margins as compared to its US competitor due to its global base of operations.

He advised that while Tyson is clearly seeking to cut costs, trends across its key protein offerings indicate profit problems that could be akin to those noted by Cargill.

“TSN is implementing internal actions to improve performance, deploying capital to expand capacity and build earnings potential over time, and we are constructive on its Prepared Foods margin trajectory,” Strelzik wrote. “That said, TSN’s outlook is limited by multi-year compression in Beef margins, Chicken margins likely to remain below average, and lackluster Pork margins. While EPS estimates have come down to more reasonable levels, our FY23 and FY24 EPS estimates are modestly below consensus.”

Read more on Tyson’s plans to shutter plants in Virginia and Arkansas .

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