Although Tyson Foods experienced a difficult summer in its chicken segment, one analyst thinks the company will return to profitability in 2012.
On Monday, the company reported fiscal fourth-quarter earningsthat missed Wall Street’s expectations. Its profit, which was less than half of what it posted last year, fell sharply due to higher grain costs, especially in its chicken business.
"I think Tyson’s going to end up having a good 2012,” said Tim Ramey, a senior food analyst at D.A. Davidson & Co. “We knew that they were having a difficult summer in the chicken business, and we had forecasted a loss. The loss was bigger than what we were looking for."
Ramey has a “buy” rating and a $24 price target on Tyson. He added that the company returned to profits in both September and in the December quarter so far.
“I don’t think it’s going to be monstrous profits, but I think we’re on the road back to normalized profits in their chicken segment,” Ramey said.
The chicken segment represents about a third of Tyson’s business, in addition to its beef and pork businesses.
"They have really good margins in pork and good margins in beef," he said. "In the short term, beef margins look like they might deteriorate a little in the December quarter, but I think all three business will have pretty good profitability in 2012, and that’s a good reason to own the stock."
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Tim Ramey does not have a conflict with Tyson Foods.