Tyson Foods Inc. of Springdale on Monday reported third-quarter net income of $343 million, or 83 cents per share, up 32 percent from $260 million, or 73 cents per share, during the same quarter last year.
The publicly traded meat processor also reported revenue up 4 percent to about $10.1 billion, amid strong performance from its Prepared Foods and Chicken segments. But weakness in the company’s Beef segment prompted the company to lower its fiscal 2015 earnings guidance from $3.30 to $3.40 adjusted earnings per share to $3.10 to $3.20 per share.
In all, the results missed Wall Street expectations. The average estimate of four analysts surveyed by Zacks Investment Research was for earnings of 95 cents per share.
Shares of Tyson Foods (NYSE: TSN) fell more than 9 percent on Wall Street.
“Our beef business suffered from export market disruptions that had an $84 million impact on third quarter results, and 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,” CEO Donnie Smith said in a news release.
“While we are pleased with the performance of our business overall, unless beef market conditions improve rapidly, we will not achieve our previous guidance …” he said.
In a later conference call with media, Smith said the month of June was tough for the beef market and the slow start in the fourth quarter was why the company reassessed its guidance.
“The start of July has been about like June, frankly,” Smith said. “It looks like we’re going to struggle through Q4 now because we’re not off to a good start in July. Hey, this is a temporary deal; we’ll work through it.”
Smith said Tyson made long-term decisions in beef and would be well-positioned when the market recovered, which Smith said could happen in the later half of 2016.
“Beef is really expensive at retail, and consumers are switching to pork and to chicken,” Smith said. “Consumers just backed away from beef and went to more pork and more chicken. Beef prices are historically high for consumers and they’re back off and pork and chicken are the clear winners.”
Smith said chicken volumes were up slightly but pork saw a significant increase. The company reported record adjusted operating income of $568 million, or 80 cents per share, up 39 percent from $407 million, or 75 percent share.
Tyson lost $7 million in the beef business for the quarter compared to $101 million in income in the same quarter of 2014, but the other segments did well. Chicken increased to $313 million from $195 million and Prepared Foods went from a loss of $1 million to a gain of $197 million in the same quarter last year,
Smith said pork sales dropped because the company sold its Heinold Hog Market in the first quarter, a condition of its purchase of Hillshire Brands last year. Excluding that transaction, Tyson’s Pork sales grew nearly 3 percent in the third quarter, and Tyson reported adjusted operating income of $64 million in the quarter.
The company also said it had realized greater synergy as it continued to integrate operations of Hillshire Brands.
“Synergy capture from the integration of Hillshire Brands and profit improvement from our legacy Prepared Foods operations is going extremely well,” Smith said. “Previously, we raised synergy estimates to more than $250 million, and now we are on track to achieve approximately $300 million in fiscal 2015.”
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