Tyson Foods, Inc. 2026 Q3 Earnings Call

Please go ahead. Good morning, welcome to Tyson Foods' third quarter fiscal 2026 earnings conference call.

On today's call, Tyson Foods President and Chief Executive Officer, Donnie King, Chief Financial Officer, Curt Calaway, and incoming Chief Executive Officer, Jeff Schomburger, will provide prepared remarks. Also joining us today and available for Q&A is Wes Morris, our new Chief Operating Officer. Following the prepared remarks, we will have a Q&A session. We have also provided a supplemental presentation which may be referenced on 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 statement disclaimers 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. Segment results are presented on a segment operating income level and will be discussed on an adjusted basis. Please note that references to earnings per share, segment operating income, operating income, and operating margin in our remarks are on an adjusted basis for our fiscal periods, unless otherwise noted.

For reconciliations of these non-GAAP measures to their corresponding GAAP measures, please refer to our earnings press release. Now, I will turn the call over to Donnie.

Thank you, John, and good morning to everyone joining us today. Overall, I am pleased with our performance in the third quarter. This is the 12th consecutive quarter of doing what we said we would do. Our strategy is working, and I want to take a moment to reinforce what we've built at Tyson, a differentiated and diversified protein-centric company positioned to capture growing demand for high-quality protein. Animal protein remains a top priority for consumers and continues to gain momentum as a foundational part of a healthy diet. As consumers increasingly prioritize nutrient density and protein quality, including those adopting newer wellness and weight management routines, our portfolio aligns exactly with the foods they are choosing. We are directly tied to and stand to benefit from consumer preference as protein is economically advantaged versus every other food category.

Before I discuss the segment details, I want to emphasize how proud I am of the progress this team has made, improving our operational performance and execution, strengthening our portfolio, and positioning this company for continued long-term growth. We are the leader in the industry, have a portfolio of iconic brands that consumers are drawn to, and I am confident in where we are headed. Our brands are winning in the retail marketplace. In prepared foods, all 13 weeks of Q3 showed continuous volume and revenue share gains, including our highest volume share ever, with volume share up 70 basis points, unit share up 70 basis points, and dollar share up 50 basis points. This performance was driven by strong consumer demand, disciplined promotional execution, and targeted marketing investments.

We hold leading positions across lunch meat, dinner and smoked sausage, and we are managing price gaps and promotion with discipline to compete more effectively. Prepared foods is a branded protein platform that raises the quality and the predictability of our earnings. Innovation and distribution gains remain key engines for this business, with notable brand wins in the quarter such as Hillshire Snacking up 18.4%, Hillshire Farm lunch meat up 7%, Aidells dinner sausage up 5.8%, Hillshire Farm and Wright smoked sausage up 3.4%, and Jimmy Dean refrigerated breakfast up 2.7%. Our Tyson branded chicken categories continued their momentum in retail at 0.9% for value-added chicken category and 3.1% for fresh chicken. Innovation is central to our strategy and is showing up across our entire branded portfolio.

Last quarter, I launched our Jimmy Dean high-protein platform, which continues to perform, earning broad retail distribution and resonating with younger consumers looking for convenient protein-centric options throughout the day. This quarter, I want to highlight Hillshire brand. This is a brand built for innovation, and our portfolio reflects that. Hillshire Farm brand anchors that everyday occasion. Smoked sausage, lunch meat, and ham that consumers have trusted for decades. The Hillshire brand has also extended into snacking, where the line is rapidly growing with consumers seeking convenient, on-the-go options, and with the launch of Hillshire Reserve lunch meat, we're now capturing consumers seeking premium offerings. Craft-inspired chef quality lunch meat for a more elevated eating experience. Together, these brand extensions reach new consumers with a multi-tier offering. These launches share a common thread. They deliver on the priorities driving demand across our business, protein focused, bold flavors, and everyday convenience.

Whether through simple ingredient renovation of our core products, new high protein forms, we are innovating exactly around what consumers are looking for, and we see meaningful runway to expand distribution and bring new products to market. Now let me walk you through our third quarter results, a view of the current and future environment before Curt covers the financials and updated outlook. In the third quarter, Prepared Foods continued to outpace broader category performance in both retail and food service. Q3 marks our third consecutive quarter of volume and sales growth with sales up 1.7% or $42 million year over year to $2.6 billion. Prepared Foods segment operating income was $321 million with a margin of 12.6%. Operating income was down slightly year over year as roughly $30 million of higher commodity costs in the quarter outpaced pricing, which continues to catch up.

As commodity costs moderate, that benefit will take time to flow through production and inventory. We expect it to be realized later in the fourth quarter and into fiscal 2027. Our results demonstrate continued execution on the controllables and the continued momentum of our strategy and diversified portfolio of leading brands and proteins. We delivered yet another impressive quarter in chicken with segment operating income of $488 million, an increase of $40 million year over year at a margin of 11.2%. Demand remained robust and our customer-centric approach continued to drive volume gains. Our retail and food service volume up 3.8%, nearly four times our total volume growth of 1%, reflecting the strength of our strategic customer partnership and consumer demand. We hold the number one brand of chicken, and our differentiated chicken model continues to outperform commodity producers.

The outperformance is grounded in structural drivers, including end-to-end execution, live performance, branded and value-added mix, and strategic customer relationships. We continue to strengthen live performance, yields, asset utilization, labor productivity, and supply chain discipline, supporting our seventh consecutive quarter of year over year volume and sales growth and reinforcing the consistency of our chicken business. Importantly, our chicken results are increasingly driven by consumers and customers rather than commodity markets, supported by a favorable mix of value-added and branded products, disciplined revenue management, and strong operational execution. Notably, our net price realization increased versus the prior year, even as input markets softened. Further evidence that our results are driven by mix, innovation, and execution rather than commodity pricing. To put that into context, industry chicken cutout values fell, yet our commercial model anchored in improving mix, volume commitments, and value-added pricing structures enabled us to grow net price realization.

In beef, we continue to navigate the well-documented challenges of the current cattle cycle. Beef segment operating income was a loss of $138 million. Sales reflected that environment. Volume declined 15.9% while pricing rose 12.1% as constrained supply pushed input costs and pricing higher. Our footprint optimization actions from the second quarter delivered as expected. However, it was more than offset by USDA margin compression. We remain focused on what we control, customer mix, revenue management, network productivity, cost discipline within a footprint better aligned to current supply environment. The recent announcement of a phased reopening of the Mexican border for the importation of cattle shows potential improvements to long-term cattle availability. We appreciate and support the USDA efforts to protect and to reopen the border.

Although the reopening won't have a material impact on the remainder of this fiscal year, which ends in September, it does provide the potential for some level of improvement in 2027 and beyond. To be clear, the reopening of the Mexican border will not solve the entire gap of beef losses we are currently seeing. We are not waiting passively for the cattle cycle to turn, and we continue to focus on improving the variables within our control. Simply stated, our mission in beef is to be the best operators in the areas in which we compete. Our pork segment continued to operate in a stable environment. Operating income was $60 million with a margin of 3.8%. Consumer demand was solid and hog supplies were adequate. Together, these factors have kept the pork value chain well-balanced, supporting more consistent and predictable operating margins.