Tyson sales up, income down
Firm on record pace for fiscal year profits
Rising exports and the addition of prepared-foods company AdvancePierre kept Tyson Foods Inc. on course for record earnings in fiscal 2017, company officials said Monday.
The nation’s largest meat company released a third-quarter earnings report that showed mixed results, with stronger sales across all business segments along with lower earnings per share and lower net income compared with the same quarter last year. Tyson shares rose almost 6 percent Monday.
For the quarter that ended July 1, Tyson reported a profit of $447 million, down from $484 million a year before. Revenue was $9.85 billion, up 4.7 percent from the same quarter in 2016. The Springdale-based company beat analysts’ sales projections of roughly $9.48 billion, according to Zacks Consensus Review.
With strong sales and financial support from acquired companies — Hillshire Brands Co. and AdvancePierre Foods — Tyson’s third quarter positions the company for a year of record earnings per share and operating income, said Tom Hayes, Tyson’s president and chief executive officer.
“Every segment delivered volume growth behind a strong start to grilling season and new product innovation,” Hayes said.
The company reported higher adjusted earnings compared with the same quarter last year in all divisions — beef, pork, chicken and prepared foods.
Tyson jumped from $91 million in operating income in its beef segment in last year’s third quarter
to $147 million in the same quarter this year. The company earned $136 million in operating income for its pork segment, up from $122 million in the same quarter last year.
Tyson attributed its improved beef and pork performance to increased domestic and overseas demand and favorable market conditions worldwide.
The company’s chicken and prepared- foods segments showed stronger sales but lower operating income. Poultry income fell 22.6 percent in the third quarter.
Bob Williams, senior vice president and managing director of Simmons First Investment Group, said Tyson is in a position where demand is exceeding available chicken products.
To compensate for low supply, Tyson has purchased chicken products from competitors and increased retail prices, which is having little to no effect on demand.
“Consumer demand keeps growing. More and more consumers are buying up chickens strips at higher prices, and it’s having no material impact on demand,” Williams said, adding later that “With the buy versus grow model, it can be more expensive.”
According to the earnings report, high chicken demand was offset by fires at two Tyson plants this spring, as well as decreased sales of rendered products. The company also cited advertising and marketing expenses as a catalyst for lower operating income in the chicken segment.
Tyson said it expects next year to be a little different. The U.S. Department of Agriculture predicts chicken production will increase roughly 2 percent.
“For fiscal 2018, we believe our chicken segment sales will grow and operating margin should remain similar to fiscal 2017 results,” Hayes said. Tyson estimated that its prepared foods, beef and pork segments will also perform well next year. Tyson estimated that strong export markets and increased USDA meat production for 2018 will increase sales across the board.
The company is also betting on divestitures and funds from recently acquired companies to cushion future operations.
Tyson estimates the AdvancePierre acquisition will benefit the company by more than $200 million by the end of fiscal 2020, with funds mainly going toward the prepared-foods segment. Tyson expects the Hillshire Brands acquisition will benefit the company by $675 million by the end of this fiscal year.
Tyson is planning to close on the sale of three non-protein businesses — Sara Lee Frozen Bakery, Kettle and Van’s — by the end of 2017. The company is expecting to record a net pretax gain from the sales of those businesses, formerly owned by AdvancePierre. Tyson excluded the projected results from the fiscal 2018 outlook.
Tyson’s third-quarter earnings beat analysts’ projections leading up to to Monday’s announcement, but fell short of earnings per-share predictions. Tyson’s earnings per share fell to $1.21, from $1.25 in the same quarter last year.
Tyson shares rose $3.60, or 5.7 percent, to close Monday at $66.90.