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F500-2023-080-Tyson Foods

Tyson Foods is among the world’s largest meat processors. Based in Springdale, Ark., the company recorded $53 billion in revenue, up 13% from the previous year, and projected a robust 2023. 
<ul> 
 	<li>Rising inflation and supply-chain snarls in 2022 trickled down to food, prompting Tyson to increase prices on some of its meats. Such factors, combined with a tighter consumer budget, led to mixed results across Tyson’s product portfolio. For instance, sales of pork and beef decreased, while chicken sales increased, a sign of consumers opting for cheaper proteins.</li> 
 	<li>The company’s CFO and fourth-generation heir, John R. Tyson, was arrested in November 2022 and charged with public intoxication and criminal trespassing. He pleaded guilty, apologized, and received the board’s backing to stay in his role at Tyson Foods.</li> 
 	<li>The company announced plans in December 2022 to consolidate its offices in Illinois and South Dakota and move corporate workers to its headquarters in Arkansas.</li> 
</ul>

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<span data-sheets-value="{&quot;1&quot;:2,&quot;2&quot;:&quot;Despite plant closures and mass COVID-19 infections in its workforce, Tyson, the biggest meat producer in the U.S., ended the 2020 fiscal year with net revenues of $43.2 billion, a nearly 2% increase from 2019. After discontinuing a patty made of a mix of real beef and pea protein launched in 2019, Tyson recently debuted an expanded selection of 100% vegan products, including plant-based ground beef, bratwurst, and Italian sausage. The launch comes as the company pushes to gain market share in the plant-based foods market dominated by Beyond Meat and Impossible Foods.&quot;}" data-sheets-userformat="{&quot;2&quot;:14721,&quot;3&quot;:{&quot;1&quot;:0},&quot;10&quot;:2,&quot;11&quot;:4,&quot;14&quot;:{&quot;1&quot;:2,&quot;2&quot;:0},&quot;15&quot;:&quot;Calibri&quot;,&quot;16&quot;:11}">Despite plant closures and mass COVID-19 infections in its workforce, Tyson, the biggest meat producer in the U.S., ended the 2020 fiscal year with net revenues of $43.2 billion, a nearly 2% increase from 2019. After discontinuing a patty made of a mix of real beef and pea protein launched in 2019, Tyson recently debuted an expanded selection of 100% vegan products, including plant-based ground beef, bratwurst, and Italian sausage. The launch comes as the company pushes to gain market share in the plant-based foods market dominated by Beyond Meat and Impossible Foods.

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F500-2021-73-Tyson Foods

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G500-2020-287-Tyson-Foods

Tyson CEO Noel White, who was tapped for the top spot in September 2018, made good on his promise to expand into international markets in 2019. The Arkansas-based meat giant acquired the Thai and European operations of Brazilian food processor BRF S.A., giving it a scalable footprint in Asia and across Europe via an array of regional brands, like Grabits, Hot ‘N’ Kickin’ Chicken, Speedy Pollo, and Sadia. The company also launched its Raised &amp; Rooted brand to introduce “value-added protein” options, often in highly specialized forms like plant-based nuggets or blended burgers. The company ended 2019 with $42.4 billion in revenue, a 5.8% increase from 2018. April 2020 presented a brand new challenge, as the company shut down plants temporarily as hundreds of workers tested positive for COVID-19.

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F500-2020-079-Tyson

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Global business is back. After limping through a worldwide financial crisis and economic slowdown, the 500 largest companies ranked by revenues shattered all sorts of performance records in 2013: They racked up combined revenues of $31.1 trillion, up 2.5% from 2012, and profits soared 27% to nearly $2 trillion. China’s 95 companies (up from 89 last year) posted $5.8 trillion in revenues. The U.S. has four fewer companies on the list than last year but remains (for now) the country leader, with 128 corporations on the list—including No. 1 Wal-Mart Stores—reporting $8.6 trillion in revenues. 

Wal-Mart stayed on top as its sales crept closer to half-a-trillion dollars. Apple moved into the top five. And UnitedHealth Group continued its steady climb. 

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Founded in 1935, Tyson is a global food company that operates in four segments: prepared foods, pork, chicken, and beef. It processes live farm animals, manufactures frozen food, and sells products to retailers and wholesalers.

Q3 2026

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Q1 2025

Tyson Foods (TSN): Company Profile, Stock Price, News, Rankings

legacy

Tyson Foods

tyson foods

Good morning, and welcome to the Tyson Foods Second Quarter twenty twenty five Earnings Conference Call. All participants will be in listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note today's event is being recorded. I would now like to turn the conference over to Sean Cornett, Vice President, Investor Relations.

Good morning and welcome to Tyson Foods' second quarter fiscal year twenty twenty five earnings conference call. On today's call, Tyson's President and Chief Executive Officer, Donnie King and Chief Financial Officer, Kirk Calloway, will provide prepared remarks followed by Q and A. Additionally, joining us today are Brady Stewart, Group President, Prepared Foods, Beef and Pork and Chief Supply Chain Officer Devin Cole, Group President, Poultry and Global Business Unit and Christina Lambert, Chief Growth Officer. We have also provided a supplemental presentation, which may be referenced in today's call and is available on Tyson's Investor Relations website and via the link in our webcast. During today's call, we will make forward looking statements regarding our expectations for the future.

These forward looking statements made during this call are provided pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward looking statements include all comments reflecting our expectations, assumptions or beliefs about future events or performance that do not relate solely to historical periods. These forward looking statements are subject to risks, uncertainties and assumptions, which may cause actual results to differ materially from our current projections. Please refer to our forward looking statements disclaimer on Slide two as well as our SEC filings for additional information concerning risk factors that could cause our actual results to differ materially from our projections. We assume no obligation to update any forward looking statements.

Please note that references to earnings per share, operating income and operating margin in our remarks are on an adjusted basis unless otherwise noted. For reconciliations of these non GAAP measures to their corresponding GAAP measures, please refer to our earnings press release. Now, I'll turn the call over to Don.

Thanks, Sean. You've heard me say before that operational excellence never gets old or goes out of style, and this quarter is another proof point. Our strong results underscore the consistent execution of our strategic priorities. Our teams remain focused on execution and proactively navigating an evolving environment. This marks our fourth consecutive quarter of year over year growth across sales, adjusted operating income and adjusted earnings per share.

Second quarter adjusted operating income is better by more than $100,000,000 or 27% versus last year and our margin expanded by 70 basis points. Our Chicken, Pork and Prepared Foods segments along with International and Other all delivered year over year adjusted operating income growth. We achieved 48% growth in adjusted earnings per share reflecting improved operating performance and strategic execution. We improved our net leverage ratio versus last year through deliberate actions and are maintaining a healthy balance sheet underpinned by our disciplined capital allocation. This reflects our resilience even as beef remains under pressure.

Now let's talk about demand. As we mentioned last quarter, 71% of U. S. Consumers sought to increase their protein consumption in 2024 according to an International Food Information Council study. The latest Power of Meat report from the Food Industry Association shows that U.

S. Meat sales at retail hit an all time high in 2024 with consumers making purchases more than once per week. According to the study, meat had 98% household reach and was included in nearly 90% of home cooked dinners. Meat is the clear protein choice recognized for nutritional value, convenience and versatility. Even with a dynamic backdrop, it is evident that consumers continue to prioritize protein, especially from animal sources, underscoring robust sustained demand across the category.

As a world class food company and recognized leader in protein, Tyson is well positioned. Our multi protein, multi channel portfolio allows us to serve a wide range of consumer protein needs across eating occasions and value tiers. Our broad portfolio of strong brands, Tyson, Jimmy Dean, Ballpark and Hillshire Farm remain key differentiators in a competitive marketplace allowing us to drive long term value. Now, let's walk through segment performance. Prepared Foods.

Prepared Foods continues to be a high performing and dependable driver of profitability. In the second quarter, we delivered double digit margins expanding by 50 basis points versus the prior year. The team continues to execute with excellence on the factors within their control. We see meaningful runway to expand margins over time. Our multi year plan focused on optimizing operations, launching winning innovations and expanding distribution is on track.

As a tangible example of how we are driving operational improvement, we have developed and implemented new tools that provide line and process level visibility of performance versus equipment capabilities. We have achieved measurable gains over the past year with line and labor efficiencies increasing by two fifty basis points and two eighty basis points respectively. These tools coupled with the improved sales and operations planning process enable smarter decisions around product scheduling and labor staffing, which in turn are improving productivity, reducing costs and supporting stronger service levels. As we continue to utilize these tools and improvements across the business, we'll continue to reduce inefficiencies and drive out waste. Innovation also continues to be an area of focus where we are making progress.

Our Jimmy Dean chicken biscuits recently won the 2024 Circada Pacesetter Award for new product of the year. We are continuing to build on that success with new line extensions like the chicken, egg and cheese biscuit that newly launched this spring. RITE brand continues to resonate with consumers as a leading premium bacon brand. We're now leveraging that equity to expand into smoked sausage, bringing the same trusted quality to a new category. We are also unlocking growth in our Hillshire Farms snacking portfolio as consumers, especially adults, continue to seek convenient protein rich options.

In chicken, we delivered our best second quarter adjusted operating income in nine years and our second consecutive quarter of volume growth. This quarter adjusted operating income nearly doubled compared to the same quarter last year, driven by strong operational execution across the business, including the best order fill rates we've seen in many years and lower grain costs. We continue to prioritize building long term winning relationships with our customers, allowing us to partner in growing the category while stabilizing our earnings profile. In beef, we're navigating a challenging environment with discipline. We're managing costs and enhancing mix toward more value added offerings.

While limited cattle availability is pressuring spreads, consumer demand has remained resilient. Our teams are executing well across procurement, production and distribution to meet customer needs and stay on track. Turning to Pork. We delivered our best second quarter adjusted operating income in three years. This reflects the strength of the improvements we have made in building a fundamentally better Pork business.

Operational advancements and momentum in value added mix contributed to our results, offsetting tighter spreads. And while hog costs remain a factor, are encouraged by a healthy demand outlook. Across all segments, we are actively monitoring the evolving macro landscape. And while we're not immune, our experience navigating past cycles gives us confidence to respond effectively and proactively scenario plan. Our strategic priorities, operational excellence, customer and consumer obsession, data and digital delivery, capital allocation and team member development remain unchanged and our teams are executing them with excellence.

Over the past several quarters, we have shared our actions to optimize our plant network and those efforts are continuing to generate efficiencies while also reducing CapEx requirements. In this next phase of our optimization journey, we're taking deliberate measured steps to evolve our logistics and distribution infrastructure. These efforts are early stage, but are critically important as we work toward greater long term efficiency. We will sell multiple smaller conventional cold storage warehouses unlocking gross proceeds in a range of $250,000,000 to $300,000,000 and then transition as a new anchor partner into several large scale fully automated next generation cold storage facilities. These facilities will reduce network complexity, streamline inventory flow and simplify processes in ways that will better position us to serve our customers smarter and faster now and into the future.

This transition will be a multi year journey, but we believe this will generate around $200,000,000 of annual savings at full completion, which is currently anticipated in 02/1930. We are confident that these actions will lead to meaningful operational improvements, greater agility, allow future growth and reducing future capital requirements. Before I turn things over to Kurt, I'd like to take a moment to talk about the thoughtful steps we're taking across our portfolio to align with evolving opportunities around product ingredients and quality standards. As a recognized leader in protein, none of the products Tyson Foods offers through our school nutrition programs include petroleum based synthetic dyes as ingredients. Today, the vast majority of our retail branded Tyson products including our Tyson Dino Nuggets, Tyson Chicken Nuggets, Tyson Chicken Bites and Jimmy Dean Maple Griddle Cakes do not contain any of these types of dyes and we have been proactively reformulating those few products that do.

We expect that our work to eliminate use of petroleum based synthetic dyes in production will be completed by the May, much sooner than the timeline provided by the U. S. Department of Health and Human Services. With that, I'll turn it over to Kurt to walk through our financial results in more detail.

Thanks Donnie. Second quarter enterprise sales were $13,100,000,000 but that includes a reduction of $343,000,000 or 2.6% related to a legal contingency accrual primarily reflected in pork. Excluding this, sales would have grown as expected year over year. Adjusted operating income increased by 27% to $515,000,000 driven by another strong quarter of performance in Chicken and solid contributions from International and Other, Pork and Prepared Foods, all of which helped offset the decline in Beef. Adjusted earnings per share grew more than 48%.

As Donnie mentioned, this is the fourth consecutive quarter of year over year growth across sales, AOI and adjusted EPS. Our multi protein, multi channel portfolio combined with our team's continued execution in a changing macro environment is delivering results. Turning to second quarter segment performance. In Prepared Foods, sales were in line versus last year as higher pricing was offset by softer volume. It's worth noting that pricing was up across retail and food away from home channels, a reflection of our effective brand portfolio and pass through pricing.

Adjusted operating income increased nearly 5% and margin improved 50 basis points versus last year. We continue to be more efficient with our marketing, advertising and promotional support costs as well as broader SG and A expenses. We also continue to make progress with our operational execution initiatives. These improvements along with pricing and lapping of start up costs last year more than offset the impact of the ongoing raw material cost increases. In Chicken, we delivered our second consecutive quarter of year over year volume growth contributing to a 2% increase in sales.

Adjusted operating income increased 95% versus last year highlighting our best second quarter performance since fiscal twenty sixteen. Year over year profit growth was driven by ongoing operational improvements and the net benefit of lower grain cost. Sales in beef increased primarily due to a higher average price per pound reflecting ongoing healthy demand. Adjusted operating income declined driven by spread compression emphasizing higher year over year cattle cost. In pork, sales were roughly in line versus last year excluding the impact of the legal contingency accrual.

Adjusted operating income increased 67% reflecting the strongest second quarter result in the past three years. Cost discipline and improvements in utilization and value added mix more than offset tighter spreads. Turning to our financial position. Our capital allocation strategy is consistent and deliberate. We remain focused on maintaining financial strength, investing in the business and returning cash to shareholders.

Year to date operating cash flow was $846,000,000 and capital expenditures came in at $464,000,000 resulting in free cash flow of $382,000,000 Year to date dividends were $349,000,000 We remain committed to the dividend as our primary way of returning cash to shareholders. We ended the quarter with net leverage at 2.3 times and $3,200,000,000 in liquidity after paying off our $750,000,000 term loan that was due in 2026. Our balance sheet remains healthy as we prioritize financial strength, our investment grade credit rating and cash management to drive long term shareholder value. Now let's take a moment to review our outlook for fiscal twenty twenty five. Our total company guidance is unchanged.

We anticipate sales to be between flat to up 1% year over year. Adjusted operating income is expected to be between 1,900,000,000.0 and $2,300,000,000 representing growth across the entire range. We still anticipate interest expense of approximately $375,000,000 and a tax rate of around 25%. We remain focused on disciplined cash management with CapEx expected to be between 1,000,000,000 and $1,200,000,000 and free cash flow in the range of 1,000,000,000 to $1,600,000,000 The macro environment is dynamic affecting each of our businesses to varying degrees. But as you can see from our supplemental materials and in our press release, our segment level adjusted operating income guidance remains unchanged as well.

With that, I'll turn the call over to Donnie.

Thanks, Kurt. In closing, I'm proud of the results our team delivered this quarter and encouraged by the momentum we're building. Despite a complex and evolving macro environment, we are focused on what we can control and executing with excellence. With sustained consumer demand for protein, the strength of our iconic brands and a continued commitment to operational excellence, we believe we are well positioned to drive long term value for our shareholders. To our 138,000 team members, from the front lines of our facilities to our offices around the world, thank you.

Your hard work, resilience and commitment are what make our success possible. And our customers and suppliers thank you for your continued partnership and support. Before moving to Q and A, I'd like to introduce Christina Lambert, Tyson Foods' new Chief Growth Officer. Christina was named Executive Vice President of Strategic Initiatives and joined the Tyson Foods enterprise leadership team earlier this year. Christina has more than twenty eight years of experience in the protein industry.

Prior to her most recent role, Christina led our retail frozen value added business within the poultry organization, where she maintained full P and L responsibility, expanded our innovation pipeline and managed the relaunch of the iconic Tyson brand. Melanie Bolden, our Chief Growth Officer and former Group President of Prepared Foods is retiring from Tyson Foods. I want to thank her for the results she has delivered and the team she has built. We're sad to see her go, but we wish her the best in the future. Melanie will remain a consultant for Tyson Foods ensuring a seamless transition with Christina.

With that, I'll turn it over to Sean as we open the line for your questions.

Thanks, Donnie. We will now move forward to your questions. Please recall that our cautions on forward looking statements and non GAAP measures apply both to our prepared remarks and the following Q and A. Operator, please provide the Q and A instructions.

Thank you. We will now begin the question and answer session. And today's first question comes from Alexia Howard at Bernstein. Please go ahead.

So you beat consensus expectations this quarter on the profit line, but you didn't raise guidance for the full year. How did the results come through versus your internal expectations?

And what's coming through better or worse than expected? And then I have a follow-up.

Thank you, Alexis. Donnie. Let me before jumping into that, let me share a couple of additional thoughts on Q2. I think this quarter clearly demonstrates the importance of our multi protein, multi channel portfolio. We are best positioned intentionally to provide affordable, accessible and nutritious protein that the consumer continues to demand in this very dynamic environment.

While beef is experiencing the most challenging market conditions we've ever seen, we increased total adjusted operating income by 27 and every segment grew other than beef. Chicken has standout performance, our best Q2 AOI in nine years. Prepared Foods has continued steady margin performance. I am pleased with our efficiency improvement through better yields, reducing waste and a continuing push for best in class execution in our plants. We've made significant strides in maximizing the efficiency of trade and MAP spending, and our innovation pipeline is the largest that we've ever had.

And we're committed to growing our prepared foods business, both volume and bottom line. We remain agile and work with Pace to optimize our operations and distribution network, and I'm excited about the next step on our journey as we transform our logistics network. This will unlock annual savings of approximately $200,000,000 over time and will support our growth into the future. The dynamic environment we and others have referenced includes uncertainty from tariff impacts and pressure on the consumer. But our guidance considers those risks and we're growing at the bottom line across the entire range.

Now in terms of guidance, I will add a little and then I will let Chris add some color to it as well. Overall, we remain excited about our FY 2025. We expect to generate profitability growth over the last year, last part of the year, the entire range of our earnings guidance, while managing through the most challenging beef environment we've ever seen. So we feel good about that overall. And our overall view of the business hasn't materially changed since we spoke last and we're reaffirming the 1.9% to 2.3%.

I would tell you that that considers we consider all the things such as the chicken business and what that looks like for the balance of the year. We think prepared foods to be more balanced across the year. We as you see what happened in the first half of the year in beef and we lost $181,000,000 and then you stack on tariffs and consumer pressure and inflation that we're seeing in the marketplace, we feel good about where we are at this point based on what we know at this point.

Yes. Just maybe a couple of comments. I think overall your question included did it come in line with our expectations or what were the differences? I think it came in line with our expectations kind of reiterating our overall stance on the full year.

Certainly in the prepared comments we made reference to our guidance does include the outlook for the remainder of the year with an assumption for tariffs and consumer dynamics. But I think we're pleased with where we are and very proud of the improvement we made on a year over year basis. And we are growing across all parts of the range that we've provided for the full year.

And can I follow-up on Chicken? Because I think the guidance, you've obviously come through very strongly in the first half of the year, but keeping the guidance the same implies, I think, a fairly big decline year over year in operating income. Is there something changing there in terms of the industry dynamics? What should we be aware of? Thank you, and I'll pass it on.

Thanks, Alexia. We still feel like we had a great we obviously had a great first half of the year. If you look at the numbers, there's just some uncertainty as you look at the back half of the year. If we look and compare it against our annual our adjusted operating income, it looks pretty good. But we also look at what consensus looks like as it relates to chicken.

I think chicken will be a clear winner in this for the balance of 2025. Let me start with that level of detail and I will kick it over to Devin Cole and Devin can give us more detail around the chicken business.

Yes. Thanks, Donnie. Again, we did deliver a very strong quarter. I'd say largely due to the strength and execution of our team and I want to thank everyone for their focus and execution around those efforts. Generally, our strategy, it will remain unchanged, but we do need to stay flexible with our tactics in this environment.

I think things that we delivered in the quarter that continue to be a priority and continue to deliver excellence moving forward we have outperformed the industry in live. We extended our improvements related to plant performance and the intense focus on the customer continued. As mentioned, we've now had two consecutive quarters with fill rates over 98%. And our innovation pipeline is resonating very well. And if you look ahead, we did reaffirm our guidance in the range of 1,000,000,000 to $1,300,000,000 And I think that takes into consideration one, the confidence that we have in the operating environment, but also the sustainable progress we've made in the first half of the year.

But I think we also have to layer in as a consideration investments that we'll be making in the back half of the year primarily to strengthen and extend our number one share in value added retail foodservice. We also have to consider our diversified pricing models. It's worth recalling that we utilize those models with our customers, many of which are linked to grain markets to build stable margins over time and two, just factoring in the overall macroeconomic environment.

Thank you. And our next question today comes from Peter Galbo at Bank of America. Please go ahead.

Hey guys, good morning. Thank you for taking the question. Donnie, I actually wanted to start on the changes in the cold storage facilities that came out. I think you mentioned $200,000,000 of annual savings and that's maybe over a five year period. And as I dug through the 10 Q, it looks like that will mostly be split between chicken and prepared foods.

So maybe just two things. One, if we could get a little bit more detail on kind of that breakout that you're anticipating, again, realizing it's over the long term. And b, obviously, has been an ongoing discussion probably for quite a bit of time, but just what kind of led finally to pulling the trigger on this? Is it part of the broader, again, restructuring as we think about the margin profile and sustainability of higher margins for Chicken and Prepared going forward?

Yes. Thanks, Peter. I think you largely answered the question in some of your comments, but just let me reaffirm those things for you. We've talked now for a couple of years about assessing every facet of our business. And I'll tell you, we've been when we looked at our logistics network and we identified some things that we didn't like, we identified opportunities for improvement.

And Brady Stewart and the team that works on this have been working on this for well over a year in terms of trying to get to this point. Since Brady and his team did all the work, let me ask him to deliver some details behind the project.

Thanks, Donnie. And as you mentioned, specifically want to call out the team for laying out a really appropriate strategy. Today, our network is too complex and too costly. And so we saw an opportunity to really right size our network that allows us to continue to grow into the future, but also bring cash into the enterprise as well. And so we mentioned the length of time associated with this transition and transformation, and it's really important to understand that there's new cold storages that will be built that will get our products closer to customers, which reduces the total number of miles, reduces our carbon footprint in delivering our products to our customers.

And ultimately, we'll deliver that over $200,000,000 in annual savings as we move out three to five years from now.

And Brady just before I move on to my next question just a rough split on that $200,000,000 between the two?

This is Kurt. I don't know that we have that for today. I think go back to the statement that think about right. This network is principally for our poultry and prepared business, very little utilization of the network that Brady is speaking to for beef and pork. So it would follow kind of the normal or a relative share split if you will based on

the volumes that are moving through the poultry and prepared foods items.

Got it. Okay. That's helpful. And maybe this one, don't know, it's probably a bit of a jump ball in terms of the question.

But in prepared foods specifically, I think again in the Q you called out kind of higher raw material costs and so maybe you kind of got to the margin you did based on SG and A. I'm just curious kind of how we should think about the go forward there. Listening to some of your peers, they're obviously baking in higher raw materials. But like are we getting to the numbers really just kind of on lower SG and A going forward? That obviously has implications for the top line.

So just wanted to understand that. Thanks.

Sure. And thanks for the question, Peter. This is Brady again. Number one, I think it's really important to understand that we're very excited about our Prepared Foods business. And this comes in a multitude of different areas.

Number one is we're excited about the team we have in place and the true management operating system that that team is placing. We're excited about our brands. We have leading brands that will continue to play a part with our customers and our consumers as well. And so when you really look out in front, it's important to understand, I think, really in three different buckets that create the excitement. Number one is from an innovation perspective.

Donnie in his prepared remarks commented on our innovation coming with Wright Brand Premium Sausage. He commented on the amazing growth we've had from a Hillshire snacking platform, and he commented on the innovation we brought forth with the success with our Jimmy Dean chicken biscuit as well. On top of that, we have one of the most robust innovation pipelines in the history of Tyson Foods, and we're extremely excited that we have innovation coming within the next year in every single one of our core categories for prepared foods. And so that's going to drive us from a growth perspective into the future. Second is from a distribution perspective, we continue to see distribution gains and getting our products in the right place for our consumers to continue to have access to them.

And then lastly, we're really supporting innovation and distribution with core fundamentals. And Donnie mentioned in his opening remarks as well that we have strengthened our foundation through operational improvements. And that comes in the form of both distribution that comes in the future relative to our supply chain announcement and also comes relative to the improvements we've seen from an operations perspective in our manufacturing assets. So I think when you parlay all three of those items on top of each other, again, we're very excited about our Prepared Foods business.

So if I could add just one thing too or a couple of things to what Brady has said. If you think about our prepared foods business since we made the major acquisition of Hillshire in 2014, this business today, we're literally putting it together and from end to end, from operations through supply chain, through trade and map efficiency management, growing with strategic customers, investing behind the brands. We're doing a lot of things. This has been a, let's call it, a 9% to 10% business. We think it's better than that.

And we believe the unlocks that we have before us will actually are proof points for the delivery of something north of a 10% return on sales as it relates to our prepared business. We're in I would just say we're in early innings, but maybe mid innings as it relates to prepared foods. But there's going to be a better day in Prepared Foods than even what we see today.

Thank you. And our next question today comes from Ken Goldman at JPMorgan. Please go ahead.

Hi. To follow-up on that last question, I really do appreciate all the efforts that are being made in Prepared Foods and certainly it seems just optically from an external angle that there's upside to margin. I think what the question that I get sometimes and that I wanted to put to you a little bit is, a, when do we start to see a real uptick, meaningful uptick right above 10% on a sustainable basis? Obviously, not perfectly above 10% every quarter. So a little bit on the timing.

And then secondly, sort of what's different this time,

the questions I get also, right? It's we've heard from Tyson a level of optimism for many years right now about prepared foods getting above 10%, hasn't really stuck at that level. So just kind of wanted to get a sense for those two, if it makes sense.

Sure, Ken. Good morning and fair question as it relates to prepared foods. If I look at Prepared Foods and let's call it earlier days, prior days, Prepared Foods, depending on the quarter and the timing, you would see one element of the business performing well and that was typically large enough to get us in the 9% to 10%. What we're describing to you today and Brady can speak in greater detail to this is that we are we have process in place for every phase of the game from end to end to improve the performance of this business. We believe there is tremendous upside to this Prepared Foods business.

And I would tell you and I don't know how to correct the fact that we haven't done what you thought we would do in the past other than to be able to show you that we're going to deliver what we said we're going to do. But this Prepared Foods business operationally, supply chain, from a trade and map perspective, from a customer relationship, growing across multiple channels is doing all the right things today and it's on purpose and led by Kyle, Marron and Brady and that team there. Brady, do want to add anything to that that I haven't?

Thanks, Donnie. Really, really well said. And number one is just to get back to the foundation. The team has really laid in a management operating system that is truly sustainable. And so to be able to continue to improve on our manufacturing costs and supply chain costs, really highlighting our line and labor efficiency, our yield improvements we've seen as well, and then benchmarking against engineered standards across our entire network really lays the foundation for us to continue to build on.

And then lastly is this innovation pipeline that we have. I am extremely proud of the team to put this together with our growth team, the R and D team and then our business management team as well. This really provides us a huge platform to leapfrog into the future.

Okay. Thank you. And then I appreciate that. Then just a quick question on chicken demand. It feels like within quick service more items are being added to menus every week.

There's articles increasingly about on that topic. And so it's becoming, I think, to some observers that maybe chicken demand at QSR will be a little bit better than what people had initially hoped. At the same time, the QSR channel maybe had some of its own challenges. So just kind of want to get a sense for what's in your guidance for QSR chicken demand now as opposed to a few months ago in light of some of those puts and takes?

Sure. Well, I mean, will give you my short answer to that. And if you look at the macro environment, when food will be consumed away from home, typically in an environment like this, would see QSR growth. And particularly QSR within the QSR business, you're going see chicken perform. I think it would be reasonable to think that that will occur again.

I think that we see signs of that going on today. And the demand there for our business, even in foodservice, is still quite strong. So let me flip it over Ken to Devin and let him add some color around that.

Yes. Maybe just a couple of points there. I mean I think relative to the QSR arena, we did see strong growth within the quarter with double digit growth within that portfolio. And we see the same thing you do with continued promotional activity throughout the spring and summer. So we're encouraged by that.

But I'll also tell you that it's bigger than that for us. We have a broad portfolio across all of our foodservice categories as well as retail and we did see growth within retail at our value added and deli offerings. So I would just say that as we look across all of our customer base and we do continue to partner with them and we're able to provide options that consumers are going to be increasingly looking for convenience and value. We feel good about our overall volume outlook.

Thank you. And our next question today comes from Ben Theurer with Barclays. Please go ahead.

Hi. Yes, good morning, Donnie and Kurt. Just a first question maybe on beef and just the general environment. So it feels like you only had a small volume drop in the quarter that could almost be explained by just the leap year and some of the calendar effects. So just wanted to understand a little bit better what you're seeing in terms of supply of cattle and the cost of that into your operations and how you think about the earlier signs maybe as to some of the heifer retention.

Is that building or not? So how should we think about just beef throughout the cycle? Are we at the bottom? Or is it just still too early to tell? That will be my first question.

Sure, Ben. Let me add a little bit to the demand softness that you talked about in our 2Q. That happens every year with us. It's not unusual to see a seasonal demand softness in Q2. And so we didn't see that as anything notable really other than the fact that it was that time of year.

But I'll give it to Brady to talk about the supply, HEPA retention and volumes.

Well, thanks, Donnie and Ben. I think it's important to note that cattle on feed from a weight perspective are extremely heavy. We're at record weights throughout the business as well. So we're seeing some weight that is offsetting from a volume perspective some of the lower headcounts we're seeing as the supply has been obviously lower than a year ago. Relative to heifer retention, and I would just say this, and Curtis mentioned this before, if we're not at the bottom relative to cow inventories, we can definitely see it from here as well.

And I think a couple of reference points behind that certainly would be we've seen an extreme drop, almost 18% in beef cow harvest numbers. And then secondary to that is we have seen a drop relative to heifers on feed, which means if the heifers are not on feed, they're being retained by farmers and ranchers as well. And we're seeing a 4% drop in heifers year over year as well. So I think the signs are really aligning to a rebuild to start to occur. And from a liquidation standpoint, really seeing the bottom at this point as well.

Okay. Perfect. Thank you very much for that. And then my second question really is just about the international business. Clearly, was a pretty significant improvement on a year over year basis, and we're working at it on a six months basis.

I mean, it's a massive difference versus last year. So help us maybe understand and I know in the past, you've talked a lot about international being an important part of the growth journey. But what have you done different and actually executed on to start to see the fruits and the benefits of all these investments that you had in years past to drive international? And what's like kind of the level you think about international could contribute on an annual basis beyond maybe what is your fiscal guidance for 2025?

Yes, sure. This is Devin. I appreciate you bringing that up and I'll make this perhaps sound simpler than it really is, meaning that it's really about the work that our team has accomplished. It's one thing to have a strategy and it's a completely different thing to have execution against the strategy and we have both in this area. We have simply improved our operational fundamentals and we've also executed a very good commercial growth strategy.

You can see that in the results. In fact, it's our strongest quarter on record. There were looking ahead, there were some overall benefit in the quarter related to one time impacts. However, we expect to continue on this path that will be favorable certainly for the prior year and in line with our expectations. I do expect the performance in the back half of the year could be affected by the macroeconomic environment because certainly the consumer around the world is not immune to some of the economic challenges that we see.

But listen, overall, we feel great about the team. We feel great about the strategy and the future of the global business and our portfolio remains important to us.

Tyson Foods (TSN) Q2 2025 Earnings Call Transcript

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