Please ensure Javascript is enabled for purposes of website accessibility

Tyson Foods to Lay Off 500 Workers After Sales Miss

By Rich Smith - Feb 6, 2020 at 11:41AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Sales miss, margins slip, and capital spending is expensive -- so workers get skewered.

Meats-producer Tyson Foods (TSN -0.23%) reported adjusted first quarter 2020 earnings per share of $1.66 this morning, and Q1 sales of $10.8 billion. Noel White, Tyson Foods' CEO, noted that these "overall results in the first quarter of fiscal 2020 were in line with expectations," and said he is "optimistic about fiscal 2020" as a whole .

And yet, Tyson is laying off 500 workers. Why?

Three pieces of meat on a skewering fork

Image source: Getty Images.

One easy explanation is the fact that -- however the CEO feels about his company's quarter -- Wall Street isn't especially pleased about it. Sales of $10.8 billion, which produces such well-known brands as Jimmy Dean and Hillshire Farm in addition to its own namesake Tyson, were up 6.1% in comparison with Q1 2019, but Wall Street analysts had hoped Tyson would report even better growth -- and more than $11 billion in sales.  

At the same time, Tyson's earnings may have beaten estimates -- but they were nothing to write home about. Net income for the company rose a bare 1.3% year over year to $1.52 per share. And even the number that Tyson (and Wall Street) emphasized, "adjusted net income per share attributable to Tyson" (a very non-GAAP number), grew barely 5.1% -- slower than revenue growth, and indicative of weakening profit margins at the meat-maker.

Tyson is also continuing to spend heavily on capital investment this year, with capital expenditures expected to be approximately $1.3 billion in 2020, up from $1.26 billion last year -- and nearly twice the $695 million Tyson as spending as recently as 2016, according to data from S&P Global Market Intelligence. That money's got to come from somewhere. Tyson, it seems, has decided to take it out of payroll.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Tyson Foods, Inc. Stock Quote
Tyson Foods, Inc.
$79.92 (-0.23%) $0.18

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/10/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.