With costs falling, Tyson Foods raises full-year profit forecast

by Ryan McCarthy
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SPRINGDALE, Ark., – Tyson Foods, the largest US meat processor, elevated its full-year forecast for the 2016 year, thanks in large part to drop in feed and livestock costs.

The net income attributed to Tyson rose 49 percent to $461 million or $1.15 a share in the first quarter. Since the first quarter surge has been so strong, Tyson is expected adjusted earnings guidance of $3.85-3.95 per share for the year another positive for stockholders. 

Donnie Smith, Tyson Foods
Donnie Smith, president and CEO of Tyson Foods

“We have a consumer-relevant portfolio packed with advantaged brands in advantaged categories, we have a superior supply chain, and we have a high-performing team focused on execution,” said Tyson president and CEO Donnie Smith. “I’m really excited about what’s ahead.”

Beef business, which is Tyson’s largest unit of sales, reported operating profits of $71 million compared with a $6 million in the period, due to lower livestock costs. For chicken business, the operating profit was $358 million compared to $351 million in 2015. For the pork business, it was $158 million up from $122 million from last year.

In the first quarter, the company also extended its gross margin to 13.1 percent from 8.8 percent in 2015. Tyson said all segments posted operating margins “in or above normalized ranges.” The total operating margin was also up from 4.7 percent to 8.5 percent. There were record operating margin for the chicken segment (13.6 percent) and prepared foods (10.9 percent).

“Our on-going efforts to invest in and grow our Core 9 product lines are paying off as sales volume for the most recent four week period was up 4 percent,” Smith said. “The Core 9 product lines represent our strongest brands, greatest pricing power and best category growth opportunities and are major contributors to volume and profitability in the retail channel.”

The Core 9 is composed of nine retail product lines including: Tyson, Jimmy Dean, Hillshire Farm, Ball Park, State Fair and Aidells.

Despite some good news, sales fell to $9.15 billion for the quarter from $10.8 billion last year. This also trails the $10 billion average estimate.

Sales were down for beef with $3.6 billion posted in the first quarter compared to $4.4 billion a year ago. For chicken the sales numbers were down as well from $2.7 billion to $2.6 billion this year. Pork also had a dip in the first quarter at $1.2 billion compared to $1.5 billion in 2015.

Tyson also dropped its full-year sales projection to about $37 billion from about $41 billion due to the decline in beef and pork prices.

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