Quarterly Income Up 32% For Tyson Foods, Revenue Up More Than 40%

A more than $900 million gain in prepared food segment revenue helped push fiscal third quarter net income for Tyson Foods up to $343 million, 31.9% higher compared to the same period in 2014. Quarterly revenue was $10.071 billion, up more than 40% compared to the $9.682 billion during the same quarter in 2014.

However, the big gains in the quarterly report were below Wall Street expectations. The per share earnings of 83 cents missed the consensus estimate of 93 cents per share. The consensus estimate on revenue was $10.3 billion.

Third quarter financials ending June 30 include the combined businesses of Tyson Foods and Hillshire Brands, which were operated as separate companies in that period of 2014 as the merger was not completed until the fourth quarter of 2014.

“The Prepared Foods and Chicken segments performed very well in the fiscal third quarter while managing numerous challenges,” Tyson Foods’ President and CEO Donnie Smith said in the earnings report released early Monday (Aug. 3). “The strong results in these two segments demonstrate the benefits of our branded, value-added product portfolio and multi-channel, multi-protein business model by partially offsetting soft results in the Beef and Pork segments.”

For the first three fiscal quarters of Tyson’s year, net income totaled $1.685 billion, better than the $1.18 billion during the same period of the previous fiscal year. Total revenue during the first three fiscal quarters hit $30.687 billion, up 12.34% compared to the $27.475 billion during the same period of the 2014 fiscal year.

The company also reduced its full-year earnings guidance based on “export market disruptions” in its beef segment. Previous guidance was in the $3.30 to $3.40 per share range, with new guidance adjusted downward by 20 cents per share.

“Our beef business suffered from export market disruptions that had an $84 million impact on third quarter results, and we continue to see very high cattle costs at a time when product values and export issues are making it difficult to realize expected revenue levels in this spread business,” Smith noted in the report.

The beef segment posted an operating loss of $7 million during the third fiscal quarter, a wide swing from the $101 million operating income posted in the same quarter of 2014.

On the positive side, the company said it is reducing debt from its $8.5 billion acquisition of Hillshire Brand at a faster pace than expected. The company also boosted estimates on synergy gains through the Hillshire deal from $250 million to $300 million.

“We reduced our total net debt $688 million during the third quarter. Because we expect to be ahead of schedule on reaching leverage ratio goals, and we see great value in our shares, we plan to start buying back stock in the fourth quarter,” Smith said in the earnings report.

SEGMENT PERFORMANCE
Tyson Foods’ chicken segment and its prepared foods segment – now including the higher margin products acquired in the Hillshire Brands deal – were the stars for the company during the first three fiscal quarters.

The company’s international sales were lower given that it recently closed the sale of its Brazilian and Mexican business unit to Pilgrim’s Pride. The only international presence Tyson Foods has is in China and a small operation in India.

Chicken
Revenue
Q1-Q3 2015: $8.366 billion
Q1-Q3 2015: $8.327 billion

Operating income
Q1-Q3 2015: $996 million
Q1-Q3 2015: $682 million

Beef
Revenue
Q1-Q3 2015: $12.826 billion
Q1-Q3 2015: $11.748 billion

Operating income
Q1-Q3 2015: -$33 million (loss)
Q1-Q3 2015: $194 million

Pork
Revenue
Q1-Q3 2015: $3.951 billion
Q1-Q3 2015: $4.677 billion

Operating income
Q1-Q3 2015: $285 million
Q1-Q3 2015: $356 million

Prepared foods
Revenue
Q1-Q3 2015: $5.814 billion
Q1-Q3 2015: $2.669 billion

Operating income
Q1-Q3 2015: $438 million
Q1-Q3 2015: -$13 million (loss)

International
Revenue
Q1-Q3 2015: $771 million
Q1-Q3 2015: $1.020 billion

Operating income
Q1-Q3 2015: -$28 million (loss)
Q1-Q3 2015: -$73 million (loss)

Tyson Foods shares (NYSE: TSN) closed Thursday at $44.35, down 3 cents. The share price has ranged from a $45.10 high to a low of $36.12 over the past 52-week period. Since the first of this year Tyson shares have risen almost 11% against a mostly flat market.