Tyson Foods outlines 2026 adjusted operating income target of $2.1B–$2.3B amid chicken segment momentum

Earnings Call Insights: Tyson Foods (TSN) Q4 2025

MANAGEMENT VIEW

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President and CEO Donnie King reported solid progress and performance for the quarter and the full year, highlighting increases in sales, adjusted operating income, and adjusted earnings per share. King noted, "Our annual growth in adjusted operating income was driven by the Chicken, Pork and Prepared Foods segments, along with notable contributions from our international business." King called out the Chicken segment as a standout with $457 million in adjusted operating income, attributed to higher volumes, improved operational execution, and lower feed costs, though partially offset by increased marketing and promotional expenses. He also emphasized Prepared Foods growth in both sales and adjusted operating income and pointed to innovation and targeted marketing as drivers of market share gains. King addressed headwinds in beef, citing record-low cattle supplies and market disruptions, but stressed a focus on efficiency and cost reduction. He stated, "Our financial position is strong with net leverage maintained at 2.1x, a direct result of deliberate actions and disciplined capital allocation to fortify our balance sheet." King also announced the appointment of Devin Cole as Chief Operating Officer.

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Chief Operating Officer Devin Cole vowed to streamline the business and reduce bureaucracy, promising "to deliver best-in-class performance and holding ourselves accountable to our customers' expectations." Cole discussed Prepared Foods achieving a 7.4% adjusted operating income margin in the quarter and noted, "Our fill rates in Prepared Foods were the highest since 2013." Cole said Chicken delivered its fourth consecutive quarter of year-over-year volume growth and highlighted that value-added product sales contributed significantly to a favorable mix and price. He added, "Chicken is positioned to be the best value protein for consumers as overall food inflation remains high."

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Chief Financial Officer Curt Calaway stated, "For the fourth quarter, total company sales grew 4.8% to $13.9 billion compared to the prior year, led by beef with solid contributions from pork, chicken and prepared foods... Q4 adjusted operating income was $608 million, up 19% compared to prior year." Calaway reported full year adjusted EPS of $4.12, up 33% from the prior year, and highlighted a $1.2 billion free cash flow and $3.7 billion in liquidity. He said, "With leverage continuing to decline and cash flow remaining strong, we continued share repurchases of $154 million during the quarter, and we returned $327 million to shareholders through a combination of dividends and repurchases."

OUTLOOK

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Tyson Foods anticipates full year 2026 sales to be up 2% to 4% year-over-year. The company expects total company adjusted operating income between $2.1 billion and $2.3 billion. Interest expense is anticipated at approximately $390 million, and the tax rate is expected to be around 25%. Capital expenditures are projected at $700 million to $1 billion, with free cash flow in the range of $800 million to $1.3 billion.

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In segment outlooks, Prepared Foods adjusted operating income is projected between $950 million and $1.05 billion for 2026. Chicken segment adjusted operating income is expected to be between $1.25 billion and $1.5 billion, with chicken seen as the "primary beneficiary of higher beef costs." Beef segment adjusted operating income is forecast as a loss between $600 million and $400 million, while pork is expected to deliver $150 million to $250 million. International/Other is projected to generate $100 million to $150 million in adjusted operating income.

FINANCIAL RESULTS

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Q4 total company sales were $13.9 billion, a 4.8% increase compared to the prior year, excluding a $355 million legal contingency reserve. Full year 2025 sales reached $54.4 billion, up 3.3% year-over-year, excluding legal contingencies. Q4 adjusted operating income was $608 million, up 19% from the prior year; full year adjusted operating income was $2.3 billion, up 26%. Adjusted EPS for the quarter was $1.15, up 25% vs. last year. The Chicken segment reported $457 million in quarterly adjusted operating income, up 28% from Q4 last year.

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Prepared Foods achieved a 3% sales increase for the quarter, or 5.7% when excluding the impact of a product recall. The segment’s margin was 7.4%, with full year adjusted operating income up 1%. Pork adjusted operating income increased 70 basis points or 63%, while beef’s adjusted operating income declined due to higher cattle costs. Tyson reported $1.2 billion in free cash flow and ended the year with $3.7 billion in liquidity and net leverage at 2.1x.

Q&A

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Benjamin Theurer, Barclays: Asked for assumptions behind chicken segment guidance of $1.25 billion to $1.5 billion. Donnie King responded that the guidance assumes operating conditions similar to FY '25, stable grain costs, and continued execution, highlighting "better yields," improved capacity utilization, and strong labor performance. Theurer followed up on Prepared Foods softness; Devin Cole attributed it to a "rapid rise in commodity costs" and said, "the fundamentals of our Prepared Foods business are very good," expecting volume and share growth in 2026 as raw materials stabilize.

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Leah Jordan, Goldman Sachs: Inquired about beef supply outlook and cost mitigation. King noted regional disparities in heifer retention and emphasized Tyson’s focus on controllable factors and optimizing the business amid "inadequate cattle availability." Jordan asked about CapEx guidance; King explained the range reflects pacing and timing of projects, with "the capacity to grow inside our existing network."

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Thomas Palmer, JPMorgan: Asked about chicken pricing and insulation from commodity prices. King said, "Breast meat pricing is the third highest in the last decade, and we have stable grains." On Prepared Foods seasonality, Cole and Calaway expect 2026 to be "more balanced."

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Alexia Howard, Bernstein: Asked about key uncertainties for 2026. Kristina Lambert called out continued protein demand and growing household penetration, emphasizing "72% of households have purchased a Tyson Foods branded product."

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Heather Jones, Heather Jones Research: Sought guidance on beef seasonality amid cattle futures volatility. King stated Tyson has factored current cattle costs and volatility into guidance. Jones also clarified chicken pricing expectations; King confirmed chicken is "very much in favor in terms of protein" and expects strong demand.

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Pooran Sharma, Stephens: Requested an updated view on chicken and margin improvement efforts. King and Cole stressed ongoing cost discipline and upside potential across all protein segments, noting pork margin improvement and operational achievements in Prepared Foods.

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Peter Galbo, BofA: Asked about chicken profitability phasing and lunch meat competition. Calaway deferred to "normal seasonality" for chicken profitability, while Cole and Lambert discussed growth in lunch meat and the importance of targeted promotional spending and innovation.

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Guilherme Palhares, Santander: Sought details on working capital and free cash flow. King guided to $800 million to $1.3 billion in free cash flow for 2026. On chicken market exposure, King explained value-added business growth and strategic customer partnerships.

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Andrew Strelzik, BMO: Asked about drivers behind Q4 chicken performance. King cited operational improvements, capacity utilization, and better genetics. On beef imports, King noted "Imports are up about 20%. Australia is a big market for that, and we're talking boneless beef and most of which ends up in our grinds."

SENTIMENT ANALYSIS

* Analysts raised targeted, sometimes skeptical questions about segment guidance, cost pressures, and competitive dynamics, but commended Tyson’s performance and clarity, as seen in opening remarks such as "congrats on a good finish for '25."
* Management maintained a confident and constructive tone in both prepared remarks and Q&A, using phrases like "We have made tremendous strides in operational improvements," and "We are confident that 2026 will be another strong year for our company." The tone was similar to the previous quarter, though with heightened emphasis on execution and innovation.
* Compared to Q3, both analysts and management maintained a slightly more positive and forward-focused tone, with management reiterating confidence in operational gains and analysts probing for sustainability of improvements.

QUARTER-OVER-QUARTER COMPARISON

* Guidance for 2026 sales and adjusted operating income is broadly in line with prior guidance, though the beef segment’s expected loss widened to a range of $600 million to $400 million from Q3’s guidance of $475 million to $375 million in losses. Chicken segment guidance increased to $1.25 billion to $1.5 billion for adjusted operating income, compared to $1.3 billion to $1.4 billion in Q3.
* Management’s tone was consistent, emphasizing operational execution, innovation, and cost discipline. Analyst questions continued to focus on beef headwinds, margin sustainability, and capital allocation, but with greater recognition of the company’s progress in chicken and pork.
* Key performance metrics—including sales, free cash flow, and adjusted EPS—showed continued improvement, and management highlighted record or near-record achievements in several business units.

RISKS AND CONCERNS

* Management flagged record-low cattle supplies, ongoing drought, herd rebuilding, and the New World screwworm in Mexico as persistent risks for the beef segment.
* Rising raw material costs were cited as pressure points, particularly for Prepared Foods, though management expects stabilization.
* Analysts questioned the sustainability of margin improvements, exposure to commodity prices, and potential impacts from shifts in consumer spending, notably regarding SNAP benefit payouts and protein demand volatility.
* Management’s mitigation strategies include operational efficiencies, cost reduction, innovation, and diversified product and channel mix.

FINAL TAKEAWAY

Tyson Foods closed 2025 with strong momentum, driven by gains in chicken, pork, and prepared foods, and reinforced by disciplined capital allocation and operational efficiency. Management projects further growth in 2026, particularly in chicken, while navigating beef segment headwinds and maintaining a focus on innovation to capture evolving consumer demand. The company’s diversified portfolio, execution on cost controls, and resilience in protein demand underpin confidence in meeting next year’s targets and sustaining value for shareholders.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/tsn/earnings/transcripts]

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