Tyson Foods is off the races in 2012 with a better-than-expected first-quarter finish according to Wall Street expectations.
The Springdale-based meat giant posted on Friday (Feb. 3) net income of $156 million, equal to 42 cents per share for the quarter ending Dec. 31. Profits sank 47%, some $138 million lower than a year ago, thanks to weaker results in the poultry, pork and beef segments.
But total sales revenue in the quarter topped $8.32 billion, up from $7.6 billion in the same period a year ago.
Investors applauded the results as shares of Tyson Foods (NYSE: TSN) opened at $19.38, up more than 5% from Thursday’s closing price. During the past 52 weeks, the share price has ranged from a $21.06 high to a $15.60 low.
In recent weeks analysts predicted Tyson would report thinner first quarter profit margins. The average consensus of 17 brokerage firms pegged net earnings per share at 34 cents, 23% below the reported income. A year ago, Tyson earned 78 cents per share, or $294 million.
Tyson CEO Donnie Smith said the company is back to profitability in chicken and pork but expects ongoing challenges in the beef segment to further pressure second quarter earnings.
“We are experiencing a rough patch, although we are still outperforming industry indexes,” he said during the earnings call.
He said Tyson expects pricing across all the meat sectors to improve in 2012 related to a 2% decline in domestic protein availability from 2011 as a result of production cuts in chicken and beef.
Tyson predicts it will earn about $2 per share in fiscal 2012 helped by more sales to the foodservice industry and improving profits in the chicken segment.
Analysts continue to be surprised by Tyson’s ability to out-perform expectations. In the past two week several analysts said they remain cautious about a lack of visibility that could continue to weigh on Tyson’s share price.
Tyson’s balance sheet remains strong despite difficult operating climates across Tyson’s meat segments. Chief financial officer Dennis Leatherby said Tyson’s total debt at the end of quarter was $1.4 billion, down $46 million from a year ago. This lower debt level provided $49 million in interest savings for the company. The company reported $857 million in cash, down from $1.2 billion a year ago.
The company continues to reinvest in its business with capital expenditures of $800 million this year. Smith said that money will be spent ramping up international operations in China and Brazil and infrastructure updates in the domestic poultry segment.
The chicken segment returned $32 million in operating income in the quarter, down from $181 million a year ago. Sales totaled $2.76 billion, up 5.7% from a year earlier. The higher revenue related to price increases and lower overall volume. Breast meat prices averaged $1.19 per pound in the quarter, still considerably lower than the $2 historical range. Leg quarter prices of 46 cents a pound is up 33% from a year ago.
Tyson’s beef segment returned $31 million in first quarter operating profits, down sharply from $116 million in the year-ago period. Tyson said it slaughtered 4.6% fewer head in the quarter to stem losses related to higher live cattle prices and weaker wholesale beef prices for beef. Going forward Tyson said beef profits will remain under pressure through the summer. Beef sales totaled $3.46 billion in the quarter, 8.7% higher than a year ago.The revenue increase related to a 19% higher prices with total volume down 8.5%.
Pork and Prepared Foods
Tyson’s pork operating profits totaled $165 million, down from $177 million. Total segment revenue was $1.47 billion thanks to a 16% rise in wholesale pork prices and a 2.6% increase in volume compared to a year ago. Operating profits for the prepared foods segment totaled $51 million, up 82% from the prior-year. The segment sales revenue totaled $861 million, helped by a 16.1% price increase and a slight decrease in total volume.