Tyson Foods Inc. fell the most in six years after the largest U.S. beef processor cut its full-year earnings forecast as higher cattle prices erode margins.
Profit excluding certain items will be $3.10 to $3.20 a share in fiscal 2015, the Springdale, Arkansas-based company said in a statement Monday. That compares with Tyson’s previous forecast of $3.30 to $3.40.
The shares fell 9.9 percent to $39.96 in New York, the biggest drop since December 2008. Tyson also reported disappointing fiscal third-quarter earnings and sales.
Tyson’s beef segment, the company’s largest by revenue, swung to an operating loss in the quarter. The unit sold products at lower prices rather than allow inventory to build up because of West Coast port strikes, Chief Executive Officer Donnie Smith said on a conference call with analysts. The beef business also saw cattle supply drop 8 percent and it faced increased competition from other, cheaper kinds of protein such as chicken.
“We continue to see very high cattle costs at a time when product values and export issues are making it difficult to realize expected revenue levels in this spread business,” he said.
Tyson said its beef segment should be near break-even for fiscal 2015. In fiscal 2016 it will be profitable but margins will be less than a normal range of 2.5 percent to 4.5 percent. Industrywide, it sees fed-cattle supplies increasing 1 percent in fiscal 2016.
Net income in the quarter through June 27 was 83 cents a share, compared with 73 cents a year earlier. Earnings excluding certain items were 80 cents, less than the 92-cent average estimate. Revenue rose 4 percent to $10.1 billion, trailing the $10.3 billion average estimate.