CLSA Anticipates Beat-And-Raise From Tyson On 'Robust' Chicken Margins

Tyson Foods, Inc. TSN is set to release Q2 earnings on August 8, and CLSA analyst Jeremy Scott has some high hopes for the food giant. CLSA is calling for EPS of $1.06, above consensus expectations of $1.03. Scott notes that Tyson’s earnings power has been driven by robust 11.5 percent chicken margins and improving 2.5 percent beef margins.

“We also expect a volume rebound in Prepared Foods at retail from the company’s pricing investments, which should help sustain margins,“ he explains.

Related Link: Now That You're Making The Big Bucks, Should You Save Or Invest?

Chicken margins of 11.5 percent are historically high for Tyson, but Scott believes that number could actually be on the low side. Last quarter, chicken margins came in at 12.7 percent, and Scott believes many of the same market factors driving high margins are still in play.

“The near-term outlook for chicken margins has improved as feed costs have rolled over on favorable weather in the US, and we continue to expect relatively tight net domestic protein supplies through 2017,” he adds.

CLSA has an Outperform rating on Tyson and has upped its price target from $77 to $82 in anticipation of a potential beat-and-raise next week.

Tyson’s stock has been a market leader in 2016 and is now up 57.9 percent on the year.

Disclosure: the author holds no position in the stocks mentioned.