Tyson Foods shares downgraded
by January 25, 2012 2:43 pm 107 views
Another Wall Street analyst, Farha Aslam of Stephens Inc., downgraded Tyson Foods shares to a hold or neutral position earlier today (Wed. Jan. 25) on sustained heavy beef losses.
Aslam reduced the meat giant’s target price to $21 a share down from $24 and slashed her earnings outlook for 2012 by 7%. Stephens estimates Tyson will earn $1.90 per share in all of 2012. The company is set to report full year earnings on Feb. 3.
“Our lower outlook reflects weaker beef profitability given the negative supply/demand fundamentals currently plaguing the industry. Our estimate is $0.19 below the consensus estimate of $2.09, which ranges from $1.67-$2.46,”Aslam noted in the investor report.
For the first nine months of the company’s fiscal year, net income totaled $653 million, up over the $567 million in the 2010 period. Total revenue for the first nine months reached $23.862 billion, up compared to the $20.989 billion in the 2010 period.
She said beef margins have been pressured as a market share war is emerging and it is unclear how long the tussle will last. Aslam says three things must occur to improve beef profits: Fewer cattle slaughtered, live cattle prices recede and retail beef prices increase.
The U.S. Department of Agriculture estimates beef packers lost and average of $87 per head in the past four months.
Stephens notes that packers often have special programs and forward sale agreements so the spot beef margins do not necessarily reflect individual companies' profits. Tyson, for example, tends to have margins $50-$60 ahead of the industry.
This is second time Stephens Inc. has reassessment Tyson Foods earnings in the past month. Two weeks ago Davenport & Associates also trimmed its expectations for Tyson Foods.
Tyson Foods shares (NYSE:TSN) were trading at $18.74, down 23 cents at noon. During the past 52 weeks the stock price has ranged from a high $21.06 to a low $15.60.