Tyson Foods expected to report quarterly lower profits on higher revenue


by Kim Souza, Talk Business & Politics

Feb 4, 2019


Despite Tyson Foods’ efforts to boost margins across its large processing operations the meat giant struggles to combat excess supplies and higher freight costs that are expected to bring first-quarter net income down by at least 14% compared to a year ago, on a per-share basis.


Tyson Foods reports its first-quarter earnings on Thursday, (Feb.7) ahead of the market opening. Wall Street expects consensus earnings per share of $1.55, down from $1.81 earned a year ago. Weakness in the chicken segment is the primary reason cited by analysts for the earnings decrease.


The Springdale-based meat titan is expected to post net income of $565 million for the quarter ending Dec. 31, compared to $1.632 billion in the same period one year ago – with $790 million of that resulting from the lower federal tax rate. The company reported net income of $594 million in the same quarter of fiscal 2017.


Revenue is expected to increase 1.3% from a year ago, to $10.36 billion, based on the most recent consensus estimates from Wall Street analysts who follow the company. Tyson’s fiscal 2019 began on Oct. 1, 2018, and the results in the first quarter run through Dec. 31, 2018. Of the 14 analysts covering the stock and reporting through Yahoo! Finance, nine have Tyson Foods rated a “buy” position believing the stock will outperform the rest of the market in the next year. Six analysts rate Tyson stock as “hold” and remain neutral on the stock. Four analysts believe the stock underperform the market. One analyst ranked the shares a “sell.” as of the end of 2018. The consensus median target price for Tyson Foods is $69.80.


Steve Kay, publisher of Cattle Buyers Weekly, recently noted In Food Business News that chicken profits were depressed last year and could remain so unless processors reduce production to raise prices, or unless beef and pork sales at retail and food service falter. Kay said 2018 was a record year for beef and strong for pork despite the impact of tariffs. He said Tyson runs an efficient pork business and he thinks it could do better if the tariffs are removed. Kay said beef processors will continue to have ample supplies of fed cattle and are set up for another record year so long as beef demand remains strong in the U.S. and abroad.


Tyson executives warned in the fourth quarter report there would likely be weakness in chicken for the short-term with prospects looking better as the year progresses  USDA projects boiler production to rise 1.7% this year with more than 43.37 billion pounds processed. Beef production is expected to total 27.81 billion pounds, rising 3.3% from last year. Pork production is expected to set a record with 27.715 billion pounds processed, up 5.3% over last year.


The U.S. Meat Export Council expects meat exports to increase 1.6% this year. But Kay said two clouds hanging over the industry are the the availability of skilled workers to staff the industry’s hundreds of processing plants and higher shipping costs stemming from a shortage in truck drivers that appears to be worsening.


Cargill, a major Tyson competitor in beef, has said changing immigration policies and limited labor pools in many rural areas pose challenges for all processors and manufacturing in general.


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