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Tyson Foods Q3 profit tops estimates

Tyson Foods (TSN) reported a 21% jump in earnings for the third quarter as strong sales from Beef and Prepared Foods segments drove sales higher, slightly offset by oversupply and pricing headwinds. The bottom-line exceeded analysts’ expectations, while the top-line missed consensus. Shares of the meat producer rose more than 2% in the premarket session.

Net income attributable to the company climbed by 21% to $541 million or $1.47 per share, while adjusted EPS increased by 18% to $1.50. Tyson Foods expects fiscal 2018 benefit of about $0.77 on an adjusted basis.

Sales rose just 2% to $10 billion as Chicken and Pork segments faced stiff headwinds.

The company gained from increasing demand for protein-rich products, which has been fueling performance in the Beef and Prepared Foods segments. Tyson has benefited from the rapidly growing demand for fresh and organic food options, courtesy of increasing health consciousness.

Tyson Foods third quarter 2018 earnings
Tyson Foods Q3 2018 Earnings Infographics

For fiscal 2018, the company expects sales to grow about 6% to $40 billion – $41 billion. For fiscal 2019, Tyson expects sales to grow to $42 billion due to volume growth, mix and about $150 million from the impact of the Tecumseh Poultry and American Proteins acquisitions net of divestitures.

The company predicts capital expenditures to approx $1.2-$1.3 billion for fiscal 2018 and $1.6 billion for fiscal 2019. Capital expenditures will include spending for production growth, safety, animal well-being, infrastructure replacements and upgrades, and operational improvements that will result in production and labor efficiencies, yield improvements and sales channel flexibility.

Recently in July-end, Tyson lowered its annual profit forecast due to uncertainty in trade policies, increased tariffs that could negatively impact domestic and export prices, mainly chicken and pork, and increased volatility in the commodity markets. The company had lowered adjusted earnings guidance to around $5.70-$6.00 a share from $6.55-$6.70 a share.

In fiscal 2019, the company expects industry fed cattle supplies in Beef to rise about 2%, and industry hog supplies in Pork to increase about 3%. In fiscal 2018, the company expects to capture Financial Fitness Program net savings of about $80 million for the Chicken segment and about $140 million for Prepared Foods. Tyson expects to close on the sale of its pizza crust business in the fourth quarter of fiscal 2018.

Shares of Tyson ended Friday’s regular trading session up 0.35% at $57.75 on the NYSE. The stock fell more than 8% for the past year and more than 28% for the year-to-date.

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