CHICAGO – Just five days before Springdale, Ark.-based Tyson Foods announced its fourth quarter results, Ken Perkins, an analyst with Morningstar, Inc., wrote that despite record-high, drought-induced price increases for grains and pressure on Tyson shares based on short-term earnings, “we think long-term industry fundamentals are relatively unchanged.” He went on to write in a morningstar.com brief that Tyson’s share price warrants investors’ attention.
Perkins estimated that Tyson’s chicken business will bear the brunt of the drought’s impact.
“Tyson's chicken segment margins will be hardest hit by elevated grain prices over the near term, as the segment's vertical integration requires that Tyson directly purchase grains used to feed broilers,” he wrote.
Despite realizing positive impact from some incremental hedging in response to a smaller-than-expected harvest of 2012 crops resulting from the drought, chicken margins are expected to be negatively affected by it throughout the first few quarters of 2013.
Overall, Perkins writes, “the full-year impact of the drought on fiscal 2013 earnings is still highly uncertain.”