Tyson Foods Raises Full-Year Profit Forecast as Costs Drop

February 5, 2016 10:06 AM

Tyson Foods Inc., the largest U.S. meat processor, raised its forecast for fiscal full-year profit as a decline in the cost of feed and animals improves margins at its chicken and pork businesses. The shares rose the most in two years.

The company projected profit excluding one-time items of $3.85 to $3.95 a share for the year through September, up from $3.50 to $3.65 previously. Springdale, Arkansas-based Tyson said Friday in a statement that it increased the forecast after “strong” fiscal first-quarter earnings, which exceeded analysts’ estimates. The stock jumped 9.7 percent to $56.98 at 9:39 a.m. in New York.

Ample supplies of corn and soybeans over the past year have meant cheaper animal feed. That situation is unlikely to change anytime soon, which will help keep a lid on Tyson’s costs and support its margins. Futures prices for corn and soybeans, two of the main ingredients in chicken feed, have declined 4.3 percent and 11 percent respectively in the last year.

The company is also benefiting from cheaper prices for the animals it slaughters and processes at its plants. U.S. prices for hogs, chickens and turkeys will decline as production increases in 2016, the Department of Agriculture said in a report last month. The domestic cattle herd is showing signs of starting to rebound while chicken and hog producers continue to expand.

“We have a consumer-relevant portfolio packed with advantaged brands in advantaged categories, we have a superior supply chain, and we have a high-performing team focused on execution," Chief Executive Officer Donnie Smith said in the statement.

Net income was $1.15 cents a share in the three months through December compared with 74 cents a year ago. That beat the 89-cent average of nine estimates compiled by Bloomberg.

Still, sales fell to $9.15 billion from $10.8 billion, trailing the $10 billion average estimate. Tyson lowered its full-year sales forecast to about $37 billion from about $41 billion as prices for beef and pork decline.

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