Why Tyson Foods Stock Lost 16% in July

Trade battles are negatively impacting the meat giant's bottom line.

Demitrios Kalogeropoulos
Demitrios Kalogeropoulos
Aug 2, 2018 at 2:58PM
Consumer Goods

What happened

Tyson Foods (NYSE:TSN) underperformed the market last month by shedding 16% compared to a 3.6% increase in the S&P 500, according to data provided by S&P Global Market Intelligence.

The slump added to a rough year so far for the meat specialist's investors, as shares are down by nearly 30% so far in 2018.

^SPX Chart

^SPX data by YCharts.

So what

Investors reacted harshly to a sharp downgrade in the company's short-term earnings expectations. Late in the month, Tyson executives said that profits should come in between $5.70 and $6.00 per share rather than the previous target range of $6.55 to $6.70 per share.

Various cuts of red meat displayed in dark styrofoam trays

Image source: Getty Images.

Management noted several negative trends that contributed to the weakening outlook, including tariffs that are pushing up export prices and an imbalance between supply and demand for chicken and pork products. "The combination of changing global trade policies here and abroad," CEO Tom Hayes said on July 30, "and the uncertainty of any resolution, have created a challenging market environment."

Now what

Hayes and his team believe they can deal with many of the cost and pricing challenges by aggressively managing expenses. However, the company's updated outlook, due when it posts quarterly results on Aug. 6, will likely reflect expectations for continued sluggishness on both the top and bottom lines.