Analysts underestimated Tyson Foods

On a day when major market indices lost ground, Tyson Foods shares (NYSE: TSN) gained another 3% in heavy trading Tuesday (May 8). Tyson shares closed at $19.24, rising 61 cents as more than two and a half times the normal shares traded hands.

Tyson executives continue to baffle analysts who again underestimated the meat giant’s quarterly earnings reported Monday. Tyson Foods posted net profits of $166 million, up from $159 million a year ago. Wall Street’s consensus estimate was $140 million.

That said, four industry analysts wasted no time in raising their fiscal 2012 earnings expectations following Monday’s upbeat call.

CEO Donnie Smith said the company should pocket $2 per share this year, but admitted there is work to do before that check can be cashed.

Stephens Inc. analyst Farha Aslam raised her estimate for Tyson’s 2012 earnings to $2 a share from $1.85, based on the company’s faster-than-anticipated recovery in poultry, anticipated higher profits for beef and potentially higher results in the prepared foods segment.

She held tight at $2.10 a share for fiscal 2013 citing concerns that tighter cattle supplies are likely to hinder normal operating margins.

Heather Jones, analyst with BB&T Capital Markets, likes Tyson for $1.99 a share in fiscal 2012 up from $1.92, but admitted her estimate still has upside potential if demand remains intact.

Christina McGlone at Deutsche Bank raised her 2012 estimate to $2.01 from $1.88 a share. McGlone approved of Tyson management’s disciplined approached to chicken production to the extent of buying some parts in lieu of overproducing. She noted the company is focused on managing margin not marketshare in the volatile beef industry.

BMO Capital Markets analyst Kenneth Zaslow raised his estimate for fiscal 2012 to $1.97 from $1.94 a share, crediting Tyson’s delivery of above-industry margins across the board in the second quarter. He also noted Tyson’s improved business model covering cost structure, inventory management and a focus on margins for the three-cent increase.

Also this week, Tyson Foods' board of directors declared a quarterly cash dividend of 4 cents per share on Class A common stock and.3.6 cents per share on Class B common stock, payable on Sept. 14, to shareholders of record at the close of business on Aug. 31.