Tyson Foods, Inc. (TSN) Earnings

Management highlights

### Leadership Transition - Outgoing CEO Donnie King will remain on the board of directors to support incoming CEO Jeff Schomburger - Incoming CEO Jeff Schomburger has served on Tyson's board for over 10 years, and will maintain the company's existing successful strategy - New Chief Operating Officer Wes Morris has joined the executive team ### Core Strategic Positioning - Tyson is a diversified, protein-centric consumer foods company positioned to benefit from growing consumer demand for high-quality, nutrient-dense protein - The company prioritizes branded, value-added offerings over commodity market exposure, which creates more stable, predictable earnings ### Brand and Innovation Progress - Prepared Foods achieved 13 consecutive weeks of share gains in Q3, with all-time high volume share up 70 bps, unit share up 70 bps, and dollar share up 50 bps - Key branded growth: Hillshire Snacking up 18.4%, Hillshire Farm Lunch Meat up 7%, Adele's Dinner Sausage up 5.8%, Jimmy Dean refrigerated breakfast up 2.7% - Recent successful launches include the Jimmy Dean high-protein platform (gaining broad retail distribution with younger consumers) and Hillshire Reserve premium lunch meat, creating a multi-tier offering to reach new consumer segments - Tyson branded chicken gained share in retail, with value-added chicken up 0.9% and fresh chicken up 3.1% ### Operational Improvements - The chicken segment has launched a new competitive big bird genetics line, with 75% adoption expected by the end of calendar 2026, and full adoption in 2027, which will improve yields, livability, and output for domestic chicken operations - Beef segment completed footprint optimization in Q2 2026, which performed as expected, with the company focusing on cost discipline and operational efficiency amid the ongoing challenging cattle cycle - Capital allocation remains disciplined, with a focus on maintaining a strong investment-grade balance sheet; the company ended Q3 with $4 billion in liquidity and net leverage of 2.1x

Guidance

- Full year 2026 guidance is presented on a comparable 52-week basis (2026 is a 53-week year): - Narrowed full-year sales growth guidance to 2.5% to 3.5% year-over-year - Adjusted total company operating income guidance revised to $2.1 to $2.3 billion, lowered due to ongoing beef segment challenges - Capital expenditures expected between $700 and $900 million, with free cash flow guidance narrowed to $1.3 to $1.7 billion - Interest expense expected to be ~$365 million, with an effective tax rate of ~25% - Segment full-year 2026 guidance: - Prepared Foods: Raised the midpoint of segment operating income guidance to a revised range of $1.3 to $1.35 billion - Chicken: Reaffirmed segment operating income guidance of $1.9 to $2.05 billion - Beef: Revised guidance to a full-year operating loss of $500 to $650 million, due to ongoing margin compression and high cattle costs - Pork: Reaffirmed segment operating income guidance of $250 to $300 million - International: Reaffirmed segment operating income guidance of $150 to $200 million - Corporate expenses and amortization: Reaffirmed guidance of $950 to $975 million - Qualitative fiscal 2027 expectations: Management expects 2027 to build on 2026 momentum, with continued growth in volume and profitability for Prepared Foods and Chicken, stable results for Pork and International, and ongoing operational discipline for Beef. Full 2027 guidance will be provided in a future call.

Segment performance

Total company Q3 2026 sales were $13.9 billion, flat year-over-year, with a 3.4% increase in average price offsetting a 2.8% volume decline driven by tighter cattle supply. Total segment operating income was $779 million, up $18 million year-over-year. Segment-by-segment results: - Prepared Foods: Revenue of $2.6 billion, up 1.7% ($42 million) year-over-year; segment operating income of $321 million, 12.6% margin; accounts for ~18.7% of total revenue and ~41.2% of total segment operating income. - Chicken: Segment operating income of $488 million, up $40 million year-over-year; 11.2% margin; accounts for ~62.6% of total segment operating income, with total volume up 1% year-over-year and retail/food service volume up 3.8%. - Beef: Segment operating income of a $138 million loss; volume declined 15.9% year-over-year, while pricing rose 12.1% due to constrained cattle supply. - Pork: Segment operating income of $60 million, 3.8% margin; operates in a stable environment with solid consumer demand and adequate hog supplies. - International: Segment operating income of $48 million, 8% margin; delivered steady performance in line with annual expectations.

Risks & headwinds

- Ongoing challenging cattle supply and the current cattle cycle have created significant operating losses in the Beef segment, and the phase reopening of the Mexican border for cattle imports will not fully resolve the current supply gap, with only incremental improvement expected in 2027 and beyond - Industry-wide chicken oversupply in commodity markets creates pressure for spot market producers, though Tyson's limited exposure to this dynamic mitigates most risk - Elevated fuel and freight costs were a headwind in Q3 2026 after mid-April; while costs are ultimately passed through to customers, recovery lags by one to two quarters - Higher commodity costs for inputs such as beef trim created margin pressure for Prepared Foods in Q3 2026, with benefits from moderating pork commodity costs not expected to flow through until Q4 2026 and 2027 due to existing inventory - Persistent macroeconomic pressure, elevated inflation, and weak consumer sentiment create headwinds for overall consumer spending, though demand for protein has remained resilient to date - Pork demand has not picked up as expected as a substitute for high-priced beef, with chicken capturing most substitute demand

Analyst Q&A

• Q: What gives Tyson confidence in the sustainability of chicken and prepared foods profits in 2027 amid a tough commodity and consumer backdrop, and does the company expect to hold or grow profits next year? /

  A: King explains that ~75% of Tyson's chicken operating income now follows the same pull-model business as prepared foods, built on committed strategic customer demand, the #1 chicken brand, and direct consumer engagement. Most chicken volume is committed before production, so Tyson is not exposed to commodity spot market oversupply pressure like competitors. The business grows through mix, brand investment, and customer partnership rather than chasing commodity prices, so performance is expected to remain strong in 2027. In Q3 2026, commodity chicken cutout values fell 45% but Tyson grew net price realization via value-added mix, demonstrating the model's resiliency.

• Q: With the ongoing rollout of improved big bird chicken genetics, eased cattle imports from Mexico, and easing prepared foods cost pressures, is it fair to expect that fiscal 2027 will be meaningfully better than 2026, even if management expects it to look broadly similar in profile? /

  A: Calaway notes that Tyson has not released formal 2027 guidance yet, as the company will finish 2026 before publishing full guidance. Qualitatively, management expects prepared foods to continue its trend of growing volume and profitability, as it has done consistently amid broader industry weakness. Chicken is expected to deliver another constructive year, with the differentiated non-commodity model driving stable performance. Beef will continue to be run as efficiently as possible, with management focusing on controlling all variables within its power amid the ongoing cattle cycle. Genetics improvements are expected to be a modest tailwind in 2027 as full adoption completes.

• Q: With a strong balance sheet, what is Tyson's updated thinking on capital allocation, and is large-scale M&A a possibility now? /

  A: Calaway reaffirms that maintaining balance sheet strength and an investment-grade credit rating is the first priority, followed by organic and inorganic investment in the business, and returning cash to shareholders. Tyson currently has $4 billion in liquidity and 2.1x net leverage, has reduced gross debt by ~$800 million year-to-date, and has returned $652 million to shareholders via dividends and buybacks year-to-date, with an additional $49 million in buy completed after quarter end. Management views current valuations as attractive for buybacks, and continues to see strong organic investment opportunities across the business, so the company will maintain a balanced approach to capital allocation.

• Q: What is incoming CEO Schomburger's core strategic focus, and will the shift to a CPG background leader change the company's existing focus on value-added protein? /

  A: Schomburger states that the existing strategy implemented under King is clearly working, so the leadership team will stay the course and accelerate the existing strategy of growing branded, value-added protein offerings. He has spent the first weeks on the job meeting team members, visiting facilities, engaging with customers, and speaking directly to consumers, and notes that there is a very strong foundation in place for future growth. He will share more detailed plans on the next quarterly earnings call.