Tyson Foods: Labor Costs To Rise With Lower Migration As Automation Opportunities Expand

Summary

• Tyson Foods faces ongoing labor shortages and high beef input prices, keeping margins low, with a potential continued decline due to a smaller migrant labor pool.
• Tyson's labor cost strains include not only its direct costs but also higher costs for animal farms and its third-party contractors, which often have more exposure to undocumented labor.
• Automation investments could offset labor costs long-term, but immediate profit pressures and high necessary CapEx spending remain concerns.
• My outlook on Tyson is neutral; expect short-term pain but potential long-term profit and stability improvements through automation.
• I expect TSN may decline if its operating cash flows slip enough that it cannot pursue automation investments competitively without external financing.

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I covered Tyson Foods (NYSE:TSN) last around the end of 2023 in the article "Tyson Foods: Overvalued Amid Prolonged Margin Compression." I had a bearish outlook on the company, seeing that rising animal protein commodity prices would

Analyst’s Disclosure:I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.