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Tyson Foods (TSN -7%) is being swallowed up by sellers today disappointed by the global food processor's relatively light revenue in Q2 (Mar) and reaffirmed FY24 (Sep) revenue outlook of flat yr/yr growth. TSN has been striving to turn things around as the sticky inflationary environment has dragged down its quarterly performances over the past several quarters. The company closed chicken processing plants, shuttered a pork facility, and eliminated thousands of jobs. At the same time, TSN shifted its focus toward customer diversification, product mix, and margin-accretive channels.

While these efforts resulted in a brighter adjusted operating income (AOI) forecast for the year, TSN still operates in a volatile global economy. With shares running +15% higher to start the year as of Friday's close, TSN's guidance is leaving investors hungry for more today, fading much of the stock's gains this year.

• TSN registered another quarter of sluggish revenue growth, falling by 0.5% yr/yr to $13.07 bln. Conversely, adjusted EPS cleared analyst expectations by double-digits for the second straight quarter, underscoring strong margin expansion in Prepared Foods offsetting weakness across TSN's other businesses. As has become common for TSN lately, segment performance was mixed.
• In Beef, sales jumped 7% yr/yr to $4.95 bln on a 3% uptick in volume. However, this segment has continued to endure limited cattle supplies leading to spread compression with AOI falling yr/yr despite the revenue improvement, leading to negative 0.7% adjusted operating margins.
• On the flip side, in Chicken, sales fell by 8% to $4.07 bln, largely due to a 6% volume contraction, underscoring lower production from TSN's past facility closures as it aligns supply to customer demand. Despite the sales decrease, AOI bounced back into positive territory from the year-ago period, showcasing the benefits of management's recent cost-cutting actions.
• Pork sales inched 5% higher yr/yr to $1.49 bln on a 3% improvement in volume, reflecting a more plentiful hog supply compared to last year. Pricing similarly edged modestly higher on improving global demand. Like Chicken, AOI in Pork rebounded from negative $31 mln to post a profit in the quarter.
• Prepared Foods, TSN's retail business, which includes its familiar Jimmy Dean, Hillshire Farm, and Ball Park brands, registered flat sales growth yr/yr at $2.40 bln. Management remarked that consumers' focus on value continued to hide retail volumes in Q2. TSN remains committed to further diversifying its product portfolio and enhancing margins in Prepared Foods.
• For the remainder of the year, TSN continued to project flat revenue growth yr/yr, a disappointing development given how the second half of each fiscal year tends to be seasonally stronger than the first half. However, it hiked its AOI guidance to $1.4-1.8 bln from $1.0-1.5 bln.

While TSN's Q2 numbers displayed meaningful changes from where it stood this time last year, there is still a long road to recovery. Nevertheless, management's recent strategic turnaround initiatives are having a positive impact. Also, even though inflation refuses to budge much, at-home channels stand to be the benefactor of constantly rising food prices, lifting TSN in the process.