Tyson Foods Inc. (TSN) Drops 10% on Weaker than Expected Results

Tyson Foods Inc. (NYSE:TSN) has posted lower-than-expected profit and revenue for the third fiscal quarter of 2015, aside from lowering its financial outlook for the full year. Tyson Foods, a leader in the food industry, posted sales of $10.07 billion for the third quarter of fiscal 2015, compared to $9.68 billion reported in the same quarter a year ago. However, the sales did not meet the $10.30 billion figure anticipated by analysts. Meanwhile, the food giant posted a net income of $344 million for the third quarter of this year, up by 33% on the year. In addition to that, Tyson Foods posted a record adjusted earnings per share (EPS) of $0.80, up by 7% on the year, but below the $0.92 a share figure anticipated by analysts. The company’s beef business suffered from export market disruptions, which impacted the third quarter results of Tyson Foods by $84 million. Moreover, the high cattle costs, along with the export issues, made it hard for the company to attain the expected revenue figures. As a result of the turmoil in the beef industry, Tyson Foods lowered its previous fiscal 2015 guidance to a range of $3.10-$3.20 adjusted EPS from  the previous $3.30-$3.40. However, Tyson Foods reduced its total net debt by $688 million during the third quarter, which definitely strengthens the company’s balance sheet. Even though the shares of Tyson Foods are currently trading at the same level as at the beginning of the year, the stock plummeted by 9.52% in today’s trading session so far.

Fresh meat

Is  Tyson Foods Inc. (NYSE:TSN) the right investment to pursue these days? Hedge funds are getting less bullish. The number of bullish hedge fund bets decreased by 3 in recent months. TSN was in 51 hedge funds’ portfolio at the end of the first quarter of 2015. There were 54 hedge funds in our database with TSN holdings at the end of the previous quarter. By the same token, the hedge funds’ total holdings in Tyson Foods decreased to $1.63 billion from $1.91 billion at the end of the previous quarter.

We pay attention to hedge funds’ moves because our research has shown that hedge funds are extremely talented at picking stocks on the long side of their portfolios. It is true that hedge fund investors have been underperforming the market in recent years. However, this was mainly because hedge funds’ short stock picks lost a ton of money during the bull market that started in March 2009. Hedge fund investors also paid an arm and a leg for the services that they received. We have been tracking the performance of hedge funds’ 15 most popular stock picks in real time since the end of August 2012. These stocks have returned 123% since then and outperformed the S&P 500 Index by around 66 percentage points (see more details here). That’s why we believe it is important to pay attention to hedge fund sentiment; we also don’t like paying huge fees.

With all of this in mind, let’s view the fresh action surrounding Tyson Foods Inc. (NYSE:TSN).

Hedge fund activity in Tyson Foods Inc. (NYSE:TSN)

Of the funds tracked by Insider Monkey, Steve Cohen‘s Point72 Asset Management had the biggest position in Tyson Foods Inc. (NYSE:TSN), which contains 4.33 million shares, worth close to $165.9 million. On Point72 Asset Management’s heels is Millennium Management, managed by Israel Englander, which held a $150.5 million position containing 3.93 million shares. Some other ‘hedgies’ with similar optimism include Dinakar Singh’s TPG-AXON Management LP, Michael Messner’s Seminole Capital (Investment Mgmt) and Ken Griffin’s Citadel Investment Group.

Due to the fact that Tyson Foods, Inc. (NYSE:TSN) has witnessed declining sentiment from the smart money, logic holds that there lies a certain “tier” of money managers that elected to cut their positions entirely at the end of the first quarter. Intriguingly, Zach Schreiber’s Point State Capital dropped the biggest stake, which previously contained 2.92 million shares, while Jason Karp of Tourbillon Capital Partners unloaded 1.50 million shares. These bearish behaviors are important to note, as total hedge fund interest fell by 3 funds at the end of the first quarter.

To conlcude with, it seems that the market might have overreacted to the lower guidance for 2015. Tyson Foods still managed to deliver a strong third fiscal quarter despite facing major challenges in some of its segments. Having said that, it is probable that the stock will bounce back soon enough so as to close down today’s gap of over 9%.

Disclosure: None