Tyson Foods stock is looking delicious after its stock plunge.

Are you too scared to buy Tyson Foods (NYSE:TSN) stock after Monday’s debacle? The ready-to-eat food producer delivered solid quarterly results for buyers to chew on. But concerns about the resilience of the U.S. consumer amid stubborn inflation have clearly created fear and loathing in the market.

If you haven’t noticed, meat prices have gone up quite a bit these days. This is an unfortunate knock-on effect of supply shortages and a widespread rebound in commodity prices.

As a result, some U.S. consumers are choosing store brand meat products over products from Tyson Foods. This is a problem for the company and its shareholders, but bold buyers still have a lot of meat left on the bone.

Tyson Foods Inventory Tanks Despite Turnover to Profitability

When it comes to quarterly earnings reports, the final results are considered final. But the market recently ignored the final data when investors had other concerns.

In the second quarter of fiscal 2024, Tyson Foods achieved a positive operating profit of $312 million compared to an operating loss of $49 million in the year-ago quarter. Additionally, the company pivoted from an adjusted earnings loss of 4 cents per share in the year-ago quarter to adjusted earnings of 62 cents per share in the second quarter of fiscal 2024.

Another negative-to-positive reversal occurred in Tyson Foods’ Free Cash Flow (FCF). For the first six months of fiscal 2024, this amounted to $556 million, up $884 million from the same period last year.

Much of Tyson’s financial success can be attributed to the impressive growth of its chicken division. Specifically, the segment achieved a profit of $158 million in the second quarter of fiscal 2024, while posting a loss of $258 million in the second quarter of fiscal 2023.

Not surprisingly, CEO Donnie King congratulated Tyson Foods on its excellent earnings results.

“During the second quarter, we maintained our positive momentum and made progress on key initiatives. The strategies we have implemented are delivering tangible results, as evidenced by our return to year-over-year bottom-line growth,” King declared.

But the mayor appears to disagree with King. Tyson Foods stock was down 7% as of midday Monday after perusing these results and management’s future guidance.

This was one of the few large-cap declines on a day when markets were generally positive. Has Tyson Foods committed a serious sin despite its encouraging earnings results?

Uncertainty about consumer resilience

Today’s market tends to obsess over future projections and ignore actual results, so it’s not hard to see why investors have sold off Tyson Foods stock. The reasons may not be rational, but they are at least identifiable.

Regarding the company’s near-term outlook, John R. Tyson, Tyson Foods’ Chief Financial Officer, acknowledged that “uncertainty remains regarding the strength and behavior of consumers.”

If there is one thing the market cannot tolerate, it is uncertainty. But it’s important to acknowledge that the situation at Tyson Foods is real. Critics like to say that the American consumer is strong and resilient. But with meat prices rising that much, cash-strapped consumers won’t be able to stay strong for long.

Melanie Boulden, president of prepared foods at Tyson Foods, also provided investors with a much-needed reality check. According to Reuters, Boulden warned that “higher raw material prices could weigh on prepared foods’ third quarter results.” In response, she said Boulden added that “inflation is putting pressure on consumers, especially low-income households, retail and food service outlets.”

Struggling Americans know this, but Wall Street often conveniently overlooks the realities of Main Street. So short-term stock traders may have found Tyson Foods’ guidance of “relatively lower fiscal 2024 sales compared to fiscal 2023” unacceptable.

‘Flats’ are prohibited.

Only optimistic forward guidance is allowed for 2024. “Flat” is a four-letter word. Investors constantly want to see explosive growth forecasts. Whether the company actually lives up to those expectations is of secondary importance.

This time too, any mention of uncertainty is prohibited, so it appears that Tyson Foods’ management has crossed an invisible line. The bar is now set fairly low and the company can clear it if its annual sales remain the same.

But now nervous stock traders are rejecting Tyson Foods like a bad piece of chicken. This is a reckless reaction and perhaps irrational market behavior, but it is surprisingly common in 2024.

So, if you want to invest in consumer goods in a well-known American brand, add Tyson Foods stock to your shopping cart today.

disclaimer: All investments involve risk. Under no circumstances should this article be taken as investment advice or constitute liability for investment profits or losses. The information in this report should not be relied upon for investment decisions. All investors should conduct their own due diligence and consult their own investment advisors when making trading decisions.