Tyson Foods, Inc. Q4 FY2025 earnings call

• The business delivered solid progress in Q4 with increases in sales, adjusted operating income, and adjusted earnings per share. Annual growth in adjusted operating income was driven by Chicken, Pork, Prepared Foods, and international business.
• Chicken segment stood out with $457 million in adjusted operating income due to higher volumes, better execution, and lower feed costs, though partially offset by increased marketing expenses.
• Prepared Foods saw growth in sales and adjusted operating income with performance improvements in production facilities and an evolving innovation pipeline to match consumer preferences.
• Beef and Pork segments are increasing yield and revenue via value-added products, though Beef remains a soft spot due to tight cattle supplies.
• Introduced Devin Cole as Chief Operating Officer, who has over 30 years of food industry experience and recently led Chicken and international businesses to improvement.
• Launches like Tyson high-protein chicken cuts and Hillshire Farm new products, focus on simpler ingredients, and strong retail performance with retail branded products outperforming the sector.

Chicken: Fourth quarter adjusted operating income was $457 million, an increase of 28%. Sales were up 3.8% year-over-year with volume contributing nearly all the increase, including value-added product sales. This is the fourth consecutive quarter of year-over-year volume growth. Prepared Foods: Sales were up 3% versus last year (excluding product recall effect) and up 5.7% excluding the recall, driven by higher pricing from raw material cost recovery and enhanced product mix. Adjusted operating income margin was 7.4% in Q4, and full year adjusted operating income was up 1%. Fill rates were the highest since 2013. Beef: Sales increased primarily due to a higher average price per pound, but adjusted operating income declined versus the prior year due to higher cattle costs outpacing higher sales. Pork: Adjusted operating income increased 70 basis points (63%), fueled by network optimization and operational efficiencies. Sales were down 1.7% due to a lower number of hogs harvested, offset by higher prices.

• Full year 2026 sales expected to be up 2%-4%. Total company adjusted operating income range $2.1 billion to $2.3 billion. Interest expense approximately $390 million, tax rate around 25%. CapEx $700 million to $1 billion, free cash flow $800 million to $1.3 billion.
• Prepared Foods adjusted operating income $950 million to $1.05 billion. Chicken adjusted operating income $1.25 billion to $1.5 billion. Beef adjusted operating income loss $600 million to $400 million. Pork adjusted operating income $150 million to $250 million. International/Other adjusted operating income $100 million to $150 million.

• Beef market challenges: Tight cattle supplies due to drought, potential herd rebuilding, and impact of New World screwworm in Mexico creating market headwinds.
• Commodity price volatility: Impact on chicken and other segments, including spot market fluctuations affecting margins.
• Consumer spending cautiousness: Consumers remain selective with spending, which could impact sales and margins.

Q: Ben Theurer asked about chicken guidance assumptions.

A: Donnie King said 2026 operating conditions expected similar to 2025, USDA projects chicken production to increase ~1% in 2026, stable grains, and execution across supply chain is key.

Q: Ben Theurer asked about Prepared Foods.

A: Devin Cole said fundamentals are good, miss in Q4 due to rapid rise in commodity costs, but expecting volume and market share growth in 2026 with operational excellence.

Q: Leah Jordan asked about beef and CapEx.

A: Donnie King discussed heifer retention and cattle supply issues, Curt Calaway talked about CapEx range being $700M-$1B reflecting project pacing and timing.

Q: Thomas Palmer asked about chicken and Prepared Foods seasonality.

A: Donnie King and Curt Calaway discussed seasonality expectations, with 2026 expected to be more balanced than 2025.

Q: Alexia Howard asked about key uncertainties for 2026.

A: Kristina Lambert talked about consumer demand for protein, diverse product portfolio, brand trust, and market adaptability.

Q: Heather Jones asked about beef seasonality and chicken pricing.

A: Donnie King discussed beef seasonality and chicken pricing expectations, noting September was an aberration and chicken demand remains strong.

Q: Pooran Sharma asked about margin stabilization and heifer retention.

A: Donnie King and Devin Cole talked about margin stabilization efforts across segments and heifer retention dynamics due to drought and market conditions.

Q: Peter Galbo asked about chicken profitability phasing and Prepared Foods competitive dynamics.

A: Curt Calaway and Devin Cole discussed normal seasonality and Prepared Foods competitive dynamics with targeted marketing and distribution growth.

Q: Guilherme Palhares asked about working capital and chicken market exposure.

A: Donnie King talked about free cash flow guidance and chicken market exposure including value-added products.

Q: Andrew Strelzik asked about chicken performance drivers and beef imports.

A: Donnie King discussed chicken performance drivers like operational excellence and beef imports impact on the business.