Tyson Foods Swings to Profit, Backs Forecast for Year
Tyson Foods, the world's largest meat processor, reported a quarterly profit, ending a string of three consecutive quarterly losses and topping results from a year ago.
Tyson Foods' also reiterated its forecast for this year, and said that its fiscal second quarter will be challenging, but profitable.
Last year, the company cut costs, laid off workers, closed meat plants and reduced chicken production as it worked to return to profitability.
With cost-cutting measures starting to kick in, Tyson said earnings for the fiscal first quarter ended Dec. 30 rose 46% to $57 million, or 16 cents a share, from $39 million, or 11 cents a share, a year earlier.
According to Thomson Financial, analysts were expecting earnings to fall to 6 cents a share.
Sales rose 1.6% to $6.56 billion from $6.45 billion a year ago.
Tyson continues to expect it will earn between 50 cents and 80 cents a share in fiscal year 2007.
Corn Prices Remain An Issue
"We remain on track to meet our earnings guidance for the year, but emphasize the dramatic rise in corn prices has become a major issue for us and others in the food industry. Companies
will be forced to pass along rising costs to their customers, meaning consumers will pay significantly more for food," said Chief Executive Richard Bond in a statement.
Corn prices have sped higher since late 2006 due to increased demand from producers of the biofuel ethanol. The potential impact of these higher costs on future results have prompted some analysts to remain cautious on Tyson.
"We believe Tyson was a great food stock to own in the 1980s, but for the last 10 to 15 years it has mostly lagged, and despite new management, we simply do not see a major turn here yet," John McMillin, analyst at Prudential Securities, said in a research report.
Tyson bills itself the world's largest processor and marketer of chicken, beef, and pork. The chicken and pork segments posted operating profits for the quarter, while beef had a loss.
A glut of meat and poultry in 2006 and low meat prices prompted Tyson and other meat companies such as rival Pilgrim's Pride to cut production. Tyson also laid off workers as it worked to return to profitability.
"We doubt that chicken and beef economics will improve much in fiscal year in 2007, and think that Tyson will not be able to reap an additional $280 million in year-over-year pre-tax income for it to meet guidance," Pablo Zuanic, analyst at JP Morgan, said in a research report.
The Springdale, Ark., company will hosted a conference call and webcast at 10 am New York time.