Possible Tyson Foods Earnings Miss Could Attract Bargain Hunters
Tyson Foods (TSN) stock may not yet reflect the full impact of the Archer Daniels Midland (ADM) EPS flop (actual $0.43 vs. expected $0.60) when the company reports after the close on August 6th. The jump in the price of corn, used a feed for Tyson products, is jamming both its profit margins and its share price (see chart). But on closer inspection, it could be this very chart behavior that might provide investors the chance to snap up shares, in the face or general analyst estimate bearishness.
According to StarMine’s SmartEstimates, the company’s set to report earnings of $0.55 per share on revenues of $8.725 billion. One top rated Tyson analyst’s EPS estimate is 19% lower, at $0.45. That makes it a so-called Bold Estimate, made in the past 30 days and differing by at least $0.03 or 5% from the mean. An actual earnings report closer that number would create an EPS whiff closer to ADM’s 29% miss.
Our five-year chart shows several corn price spikes that have negatively impacted Tyson shares. They’ve all been temporary, with the duration of such declines lasting from a few to several months, until the company was able to pass along the price increases. The exception was in 2008 in the broad stock market decline due to the financial crisis and following the Lehman collapse.
Although the recent price shock due to the drought impacting corn and other commodities in the Midwest appears more severe, the last several years of history may hint that the next few months just could be the time to own Tyson stock.
Among the things that could turn things around is the seasonally strong November-April period for the US stock market. Tyson may benefit from this seasonality along with the broad market. It’s already on the radar for those looking at beaten down stocks for more of a cyclical, rather than secular reason.
Apparently professional investors may agree, with less than 3% of shares outstanding sold short and 72% of outstanding shares institutionally owned. The StarMine Short Interest Model, which gauges the strength and weakness of a stocks based on these and other factors, isn’t signaling abnormal short selling activity.