Second Quarter Income Up Almost 40% For Arkansas-Based Tyson Foods

May 9, 2016

Continued growth in prepared foods and improved beef numbers helped Tyson Foods post a better-than-expected second fiscal quarter net income of $432 million, up almost 40% compared to the $310 million posted in the same quarter of last year.

The unadjusted per share net income of $1.07 beat the consensus estimate of 96 cents per share. The strong second quarter follows a first quarter in which net income of $461 million was up 49%.

Total revenue during the quarter was $9.17 billion, down 8.1% compared to the same quarter last year, but better than the consensus estimate of $9.04 billion.

“Our business continues to perform very well, delivering record second quarter operating income and return on sales, in what is typically the most challenging quarter of our fiscal year,” Donnie Smith, president and CEO of Tyson Foods, said in the earnings statement.

The company also raised its full year earnings guidance from $3.85-$3.95 per share to $4.20-4.30 per share.

“We’re in a great position, and we’re generating momentum that will take us into 2017 and beyond. We’ve produced record results in the first half of the fiscal year, and we expect continued strong performance in the second half. To reflect what we’ve accomplished and to demonstrate our confidence, we’re raising adjusted earnings guidance for fiscal 2016 to $4.20-4.30 per share,” Smith noted in the report.

Net income for the first six months of the fiscal year totaled $893 million, better than the $619 million in the same period of 2015. Revenue for the six months was $18.322 billion, down from the $20.796 billion in the same period of 2015.

Tyson Foods’ four segments posted operating income gains for the quarter with the chicken segment posted the largest percentage gain (12.7%).

• Chicken segment
Operating income in the quarter was $347 million, up 12.7% compared to $332 million in the same quarter of 2015. More demand for chicken and lower feed costs helped boost margins in the segment. Feed costs were down $80 million in the quarter, and are down $140 million for the first six months of the fiscal year.

Sales in the segment totaled $2.737 billion, down from the $2.829 billion in the same quarter of 2015.

• Beef segment
The beef segment saw a big shift from a $20 million loss in the 2015 quarter to a $46 million operating income in the second quarter. Growing demand, more cattle in the supply chain and an increase in cattle processed help turn the segment toward profitability.

Segment sales totaled $3.639 billion, down from $4.13 billion during the same quarter of 2015.

• Pork segment
Operating income in the pork segment was $140 million in the quarter, well ahead of the $99 million in the same quarter of 2015. The company said better “plant utilization” and lower live hog costs boosted margins in the quarter.

Sales in the segment totaled $1.19 billion, below the $1.204 billion in the same quarter of 2015.

• Prepared foods
The segment, which includes products from the Hillshire Brands acquisition, posted operating income of $197 million, up from the $160 million in the same quarter of 2015.

“For the six months of fiscal 2016, Prepared Foods was positively impacted by $206 million in synergies, of which $81 million was incremental synergies in fiscal 2016 above the $125 million of synergies realized in the six months of fiscal 2015. The positive impact of these synergies to operating income were partially offset with heavy investments in innovation, new product launches and the strengthening of our brands,” the company noted in the earnings report.

Segment sales reached $1.804 billion, below the $1.871 billion in the same quarter of 2015.

Tyson shares (NYSE: TSN) closed Friday at $67.25, up 87 cents. During the past 52 weeks the share price has ranged from a $68.84 high to a $39.05 low.

Talk Business & Politics will update this story later today.