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Tyson Foods (TSN), one of the world's largest producers of beef, chicken, and pork, once again easily exceeded EPS estimates in Q3, but the improvement on the top-line is perhaps the more encouraging development. After declining on a yr/yr basis in three of the past four quarters, sales edged higher by 1.6% to $13.35 bln, beating quarterly expectations for the first time since 4Q22. The stronger sales performance was driven by TSN's Beef and Pork businesses, which generated growth of 5.6% and 10.6%, respectively, as the eat-at-home trend gains steam while people rein in discretionary spending.

• Increasing volumes across TSN's businesses put this rising eat-at-home trend under the spotlight. Beef led the way with a 4.4% jump in volume, followed by a 2% improvement in Prepared Foods and a 1.2% increase in Pork.
• While Chicken was the laggard again with volume lower by 0.4%, this marked a significant improvement from last quarter's 6.0% decline. In recent years, the company has lowered production and closed some chicken processing plants to better align supply with demand. 
• In addition to its reduced cost structure, lower grain and chicken feed costs have provided a boost to margins and profits. Although Chicken sales fell by 3.2% to $4.08 bln, operating income improved to $244 mln from a loss of ($314) mln in the year-earlier period.
• In contrast, Beef's operating income slipped into negative territory, coming in at ($69) mln compared to $66 mln a year ago, despite the solid sales growth. The Beef business has contended with limited cattle supplies, leading to spread compression.
• Meanwhile, Prepared Foods, which includes the Jimmy Dean, Hillshire Farm, and Ball Park brands, delivered steady results with net sales inching higher by 2.1% and operating income essentially flat yr/yr at $203 mln.

Overall, TSN's results took a step in the right direction after several quarters of mixed performances. The company took a conservative approach with its FY24 revenue guidance, sticking with its forecast for relatively flat sales this year, but we believe it has a good chance of outperforming that outlook as people begin to cook more meals at home. Should the demand picture brighten even further, then TSN's upwardly revised FY24 adjusted operating income guidance of $1.6-$1.8 bln (up from $1.4-$1.8) could also prove to be too modest.