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An impeccable Q1 (Dec) performance supports solid gains for Tyson Foods (TSN +1%) today, heading to its best levels of the year. Shares of the meat processor, separating its segments into Chicken, Beef, Pork, Prepared Foods, and International, had given up roughly 12% from highs reached after its Q4 (Sep) report in mid-November as investors expressed concern over stagnating demand, stubborn cost inflation, and potential incoming tariffs.

While these concerns still linger, TSN alleviated some of the worries today by toppling earnings and sales estimates in Q1 while also raising its FY25 (Sep) revenue and profitability guidance, showcasing benefits from past operational changes and improvements within the consumer landscape. The company now expects flat to +1% revenue growth yr/yr in FY25 from down 1% to flat and adjusted operating income of $1.9-2.3 bln, up from $1.8-2.2 bln.

• In Q1, TSN recorded its fifth consecutive quarter of double-digit earnings upside, posting adjusted EPS of $1.14, a 65% spike yr/yr. In 2024, TSN conducted cost-saving moves, implementing multiple layoffs and closing several facilities. In Q1, TSN made further progress against its initiatives, exceeding its yield improvement goals, reducing the impact of distressed inventory, and lowering overhead costs. These actions flowed to TSN's bottom line, supporting its 170 bp yr/yr improvement in adjusted operating margins in the quarter.
• In Beef, TSN's largest segment by sales, revenue ticked 6% higher yr/yr to $5.34 bln, supported by a robust 5.6% volume bump and a less impactful 0.6% increase in average price. The current cattle cycle has acted as a persistent headwind, as tight supply has translated to higher prices. While performance in Q1 was encouraging, TSN left its profitability forecast unchanged for the year, predicting an adjusted operating loss of $0.2-0.4 bln, reflecting volatility within the beef industry.
• In Chicken, TSN's second-largest segment, revenue was essentially flat yr/yr at $4.07 bln, with volume growth of 1.5% partially offset by a 0.7% drop in price. However, adjusted operating income of $351 mln was TSN's best in over eight years, illuminating the company's improvements in plant operations alongside help from lower grain costs. These positives underpinned TSN's slightly raised FY25 adjusted operating income outlook of $1.0-1.3 bln from $1.0-1.2 bln.
• Other segments performed decently. Pork aligned with management's expectations, growing revenue by 6.6% yr/yr, supported entirely by a 7.0% jump in price. TSN reiterated its adjusted operation income guidance of $0.1-0.2 bln for the year in Pork. Meanwhile, Prepared Foods continued to endure lower volumes, pushing sales 2.8% lower yr/yr. However, TSN noted that the segment remains on track to reach its previously outlined FY25 adjusted operating income target of $0.9-1.1 bln.
• On tariffs, TSN felt comfortable with its capacity to manage any impacts, incorporating these into its raised outlook for the year. Pork is the main segment that would be most affected by tariffs.

Bottom line, TSN's Q1 report was encouraging, illuminating its ability to navigate sticky economic headwinds. While uncertainties will persist this year, especially if inflation continues to creep higher, TSN is making the right moves to position it for growth over the long run.