Tyson Foods Profits Up Sharply In Latest Report

Feb 5, 2016

Credit Tyson Foods

Tyson Foods’ first quarter profits soared past expectations as the meat giant added $461 million to its corporate coffers to begin fiscal 2016. 

Net Income rose 49% from the same period of last year with strong results in chicken and a turnaround in beef, the company reported Friday.

Springdale-based Tyson Foods earned $1.15 per share in the fiscal first quarter, well above the 89 cents Wall Street analysts predicted, and the 87 cents recorded a year ago. Sales revenue topped $9.152 billion in the quarter, dampened by lower overall sales volume in chicken, beef and pork while also facing deflationary prices. Revenue fell from the $10.817 billion reported a year ago.

“Fiscal 2016 is off to a very strong start in what we expect to be another record year,” Donnie Smith, president and CEO of Tyson Foods, said in the report. “Solid execution across the entire team resulted in record earnings, record operating income, record margins and record cash flows. We captured $121 million in total synergies for the quarter, with $61 million incremental to fiscal first quarter 2015.”

The year’s good start also prompted Tyson Foods to raise overall earnings guidance for the balance of 2016 ranging from $3.85 to $3.95. The optimism is fueled in party by better operating results thanks to lower grain costs and increased synergies from the Hillshire Brands acquisition.

Wall Street was bullish on Tyson’s first quarter estimates. The stock (NYSE: TSN) which closed Thursday (Jan. 4) down 97 cents to $51.95, was 5% higher Friday in pre-market trading. During the past 52 weeks Tyson shares have ranged from a $37.10 low to a high of $54.59.

The chicken segment returned $358 million in operating income in the quarter, which increased from $351 million reported a year ago. Sales totaled $2.636 billion, compared to $2.78 billion a year earlier.The dip in sales related to less chicken sold and and a 4.7% decrease in prices from a year ago. According to Georgia Dock pricing, boneless breast meat averaged $1.76 per pound in the quarter, falling from an average of $2.06 per pound a year ago.

Credit Suisse analyst Robert Moskow said Tyson management does a good job selling the majority of its chicken at higher margins based on forward contract pricing, and also pulling in more profits from its various added value activities such as marinating, breading and pre-cooking processes. Tyson said it benefited from lower year-over-year grain costs to the tune of $60 million in the quarter.

Tyson’s beef segment posted $71 million in operating income, much better than the $6 million loss during the same period in the previous fiscal year. Beef sales totaled $3.614 billion in the quarter, below the $4.391 billion in the first fiscal quarter of the previous year. Operating income increased due to more favorable market conditions associated with an increase in supply which drove down fed cattle cost

Tyson’s pork operating income totaled $158 million, improving from $122 million a year ago. Total segment revenue was $1.213 billion, down compared to $1.54 billion a year ago. Sales volume decreased due to the divestiture of the Reinhold Hog business. Without this change sales volume rose 5.5%.

Operating profits for the prepared foods segment totaled $207 million, improving from $71 million a year ago behind overall higher margins coming from Hillshire Brands products. Sales revenue came in at $1.896 billion, down from the $2.133 billion reported a year ago. Tyson execs said this segment benefitted from $95 million in synergies. The segment also saw $125 million in lower raw-material costs in the quarter.