Tyson Q4 earnings seen to get boost from beef, pork margins

Better-than-expected beef and pork margins prompted J.P. Morgan analyst Ken Goldman on Thursday (Oct 15) to raise his earnings-per-share estimate for Tyson Foods Inc.'s fiscal fourth quarter to US$0.33 from US$0.23.

Tyson is scheduled to report fourth-quarter earnings November 16.

Goldman said his estimate for the company's chicken segment margin in the quarter remains at 2.2 percent, well below the 5.9 percent of third-quarter 2009. However, the projection for beef margin is 4.1 percent, 170 basis points above the third-quarter, on cheap cattle prices. Even cheaper hog prices, meanwhile, are expected to generate a margin of about 10 percent, far higher than the historical average.

For the current fiscal year, Goldman is lowering his estimate to US$1.21 per share from US$1.29 per share to account for higher corn and soymeal costs.

For fiscal 2011, he's introducing an estimate of US$0.71 per share based on expectation's that Tyson's hog and cattle costs will have risen. Meanwhile, he projects beef and pork margins in 2011 will be 1.7 percent and 5.1 percent, respectively, which would be lower than normal for Tyson.

J.P. Morgan is maintaining its rating of Tyson shares as "overweight" on the belief that Tyson will beat Wall Street expectations by 10 cents per share this quarter and the view there is a more than 10 percent upside between the price and fair value of the stock.