Tyson Foods (NYSE: TSN) reported Q3 EPS of $1.40, $0.46 better than the analyst estimate of $0.94. Revenue for the quarter came in at $10.02 billion versus the consensus estimate of $10.56 billion.

Outlook:

• For fiscal 2021, USDA indicates domestic protein production (beef, pork, chicken and turkey) should increase approximately 1% from fiscal 2020 levels. The following is a summary of the outlook for each of our segments, as well as an outlook for capital expenditures, net interest expense, liquidity and tax rate for fiscal 2021.
• COVID-19 – We continue to proactively manage the company and its operations through this global pandemic. Given the nature of our business, demand for food and protein may shift amongst sales channels and experience disruptions, but over time we expect worldwide demand to continue to increase. We are experiencing multiple challenges related to the pandemic. These challenges are anticipated to increase our operating costs and negatively impact our volumes for the remainder of fiscal 2020 and into fiscal 2021. Operationally, we have faced and expect to continue to face capacity utilization slowdowns in production facilities from team member absenteeism and choices we make to ensure team member health and safety. The lower levels of productivity and higher costs of production we have experienced will likely continue until COVID-19 is better understood and its impacts diminish. Each of our segments has also experienced a shift in demand from foodservice to retail; however, the volume increases in retail have not been sufficient to offset the losses in foodservice and as a result, we expect decreases in volumes in the last quarter of fiscal 2020 in our Chicken and Prepared Foods segments. We cannot currently predict the ultimate impact that COVID-19 will have on our short- and long-term demand, as it will depend on, among other things, the severity and duration of the COVID-19 crisis. Our liquidity is expected to be adequate to continue to run our operations and meet our obligations as they become due. Due to the inability to reasonably quantify the total impact of COVID-19 to our operations, we are not currently providing segment adjusted operating margin guidance.
• Beef – USDA projects domestic production will increase approximately 3% in fiscal 2021 as compared to a COVID-19 impacted fiscal 2020. For fiscal 2021, we also expect ample supplies in regions where we operate our plants.
• Pork – USDA projects domestic production will increase approximately 1% in fiscal 2021 as compared to a COVID-19 impacted fiscal 2020.
• Chicken – USDA projects a relatively flat to slightly increased outlook for chicken production in fiscal 2021 as compared to fiscal 2020.
• Prepared Foods – We will continue to be responsive to changes in consumer behavior as a result of the impacts of COVID-19 as we move into fiscal 2021.
• International/Other – We expect improved results from our foreign operations in fiscal 2021.
• Capital Expenditures – For fiscal 2020, we expect capital expenditures to be approximately $1.2 billion with a similar amount expected in fiscal 2021. Capital expenditures include spending for production growth, safety, animal well-being, infrastructure replacements and upgrades, and operational improvements that are expected to result in production and labor efficiencies, yield improvements and sales channel flexibility.
• Net Interest Expense – We expect net interest expense to approximate $470 million for fiscal 2020 and $440 million for fiscal 2021.
• Liquidity – We expect total liquidity, which was approximately $3.1 billion at June 27, 2020, to remain above our minimum liquidity target of $1.0 billion.
• Tax Rate – We currently expect our adjusted effective tax rate to be around 23% in fiscal 2020 and fiscal 2021.

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