Tyson Foods continues to confront significant challenges in the beef protein segment, which remains the largest source of revenue for the U.S. meat powerhouse. According to a report, the core issues affecting beef production are largely precluded from Tyson’s influence, particularly due to ongoing drought conditions across the United States that have reduced the cattle population available for slaughter.
Despite a 1.6% increase in beef volumes for the fiscal year ending on September 28, 2024, resulting in a sales revenue rise of 6% to $20.5 billion, Tyson anticipates further losses in adjusted operating income (AOI) for this sector in 2025. The company acknowledged a shift in profitability, reporting a transition from a $233 million profit in 2023 to a $291 million loss in 2024. Leadership foresees continued losses ranging from $200 million to $400 million in the current year, compounded by projections from the United States Department of Agriculture (USDA) indicating a domestic beef production decline of approximately 2%.
“Brady Stewart, Tyson’s chief supply chain officer and president of the beef and pork division, articulated on November 12 that ‘this is one of the most dynamic beef environments in history.'” Stewart’s remarks followed a discussion alongside group president and CEO Donnie King regarding quarterly and annual results. With respect to beef, Tyson implemented a 4.4% price increase over the past year; however, prices for chicken, pork, and prepared protein products have experienced declines.
Stewart elaborated, noting, “We’ve gone through these cycles approximately every decade, but this one is particularly unique. We are witnessing record cut-out prices and unusual weights. The interaction of these variables will significantly influence future outlooks.”
In the aftermath of the recent earnings results, Tyson’s leadership reinforced the ongoing commitment to focus on controllable factors while navigating these turbulent conditions. According to analysts at AllianceBernstein, the increasingly severe droughts witnessed since the onset of summer 2024 are expected to impede the recovery of Tyson’s beef segment. The weather conditions are driving up feed costs and leading to higher liquidation rates of cattle, especially among females, thereby delaying the rebuilding of cattle stocks.
“Investors are closely watching for improvements in weather conditions and reduced liquidation of cattle,” an analyst remarked in a recent note. “As the weather in the U.S. worsens, so too does the outlook for Tyson’s beef segment.”
Conversely, the future outlook for Tyson’s other divisions appears more optimistic. The company anticipates an AOI for chicken, its second-largest protein revenue source, between $1 billion and $1.2 billion, an increase from $1 billion in 2024 and a marked improvement from a previous $77 million loss. Additionally, the pork segment is projected to achieve an AOI ranging from $100 million to $200 million, up from $142 million in 2024 and a $128 million loss in 2023.
In Prepared Foods, where Tyson aims to capitalize on trends favoring spicier foods and convenience, the forecasted AOI is estimated at $900 million to $1.1 billion, fairly comparable to 2024’s $905 million. Overall, Tyson is guiding for a relatively stable group performance, expecting a slight increase in AOI to between $1.8 billion and $2.2 billion, with anticipated total sales showing a minor decline of 1% to flat following a 0.8% increase in 2024 to $53.3 billion.
As Tyson prepares for 2025, King stated, “We will continue to shift our mix from core proteins to branded value-added products,” while also striving to enhance household penetration in key markets. He concluded, “While our brands are performing well, we see numerous opportunities to engage consumers through innovation across various meal occasions, categories, and channels.”
