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Tyson cuts profit forecast, says slaughterhouse fire among challenges

Key Points
  • Tyson Foods lowered its 2019 adjusted earnings forecast on Tuesday, citing a litany of causes including a recent fire at its Holcomb, Kansas slaughterhouse and volatility in the commodity market.
  • The fire resulted in an unforeseen shutdown at the slaughterhouse in Kansas last month, likely curtailing Tyson's meat processing operations.
  • The company also appears challenged by higher prices for animal feeds such as corn because of unprecedented planting delays this spring due to widespread flooding.
A package of Tyson Foods Inc. chicken is arranged for a photograph in Tiskilwa, Illinois.
Daniel Acker | Bloomberg | Getty Images

Tyson Foods lowered its 2019 adjusted earnings forecast on Tuesday, citing a litany of causes including a recent fire at its Holcomb, Kansas slaughterhouse and volatility in the commodity market.

The fire resulted in an unforeseen shutdown at the slaughterhouse in Kansas last month, likely curtailing Tyson's meat processing operations.

The company also appears challenged by higher prices for animal feeds such as corn because of unprecedented planting delays this spring due to widespread flooding.

Additionally, Tyson last month recalled nearly 40,000 pounds (18,144 kg) of its Weaver chicken patties after some consumers found pieces of rubber in the product.

Tyson said slower-than-expected operational improvements in the chicken segment and implementation of enhanced food safety initiatives were among the factors hurting its full-year profit.

"The discrete challenges we've encountered this quarter now lead us to believe we will fall short of our previously stated guidance," said Noel White, Tyson Foods' chief executive officer.

Tyson now expects to earn an adjusted profit between $5.30 and $5.70 per share, from a prior forecast of $5.75 to $6.10 per share. Shares of the company fell 6% in after-hours trading. Tuesday's forecast comes nearly a month after the company posted better-than-expected third quarter earnings, which sent its shares to a record high.

However, Tyson said its outlook for fiscal 2020 remains positive as it expects more favorable market conditions.

Tyson has been upbeat about the next fiscal year as it looks to reap benefits from the spread of African Swine Fever, a fatal hog disease in China.

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Key Points
  • "When you see all these people lined up outside Popeye's waiting for a bite of their terrific new chicken sandwich, you should buy the biggest arms dealer in chicken world ... Tyson Foods," CNBC's Jim Cramer says.
  • "Whether Chick-fil-A or Popeyes wins the chicken wars, Tyson will always come out ahead," the "Mad Money" host says.
  • "Maybe the real takeaway here is that people just love chicken, and if that's the case, you don't need to invest in the chicken war directly, you need to buy an arms dealer," he says.