May 8, 2012

Tyson Foods' Q2 earnings up 4.4% despite beef loss

As Tyson Foods Inc.'s reported a modest loss in its beef operations that was offset by growth at its other businesses, its fiscal second-quarter earnings rose 4.4%.

The company has benefited from price increases and strong demand abroad for pork and beef as it faces challenges from high ingredient costs. Last year's surge in exports helped drive US beef and pork prices to a series of record highs. However, in the latest quarter the beef industry has been hurt by concerns over safety, including a controversy over an additive that has been dubbed pink slime by some critics.

Tyson President and Chief Executive Donnie Smith said the company's chicken, pork and prepared foods segments all were in or above their normalised operating margin ranges, while beef essentially broke even despite extremely challenging market conditions.

Tyson anticipates gaining momentum in its fiscal third and fourth quarters--with the potential to achieve its prior guidance for per-share earnings of US$2 for the year, Smith said.

For the quarter ended March 31, Tyson reported a profit of US$166 million, or US$0.44 a share, up from US$159 million, or US$0.42 a share, a year earlier. Revenue increased 3.4% to US$8.3 billion.

Analysts polled by Thomson Reuters most recently projected earnings of US$0.39 on revenue of US$8.49 billion. Operating margin fell to 3.7% from 3.8%.

The beef segment--the largest top-line contributor--swung to a loss of US$1 million as volume slid 11%. Revenue was up 1.1% thanks to higher prices.

The chicken business's profit soared as sales improved by 6.3% thanks to higher prices. Shares closed Friday at US$18.04 and were inactive premarket. The stock is down nearly 13% this year.