Third quarter income down 7.6% for Tyson Foods, but revenue and income beat estimates

Third quarter net income for Tyson Foods fell 7.6%, but the company beat Wall Street estimates on earnings per share and total revenue. Net income for the company’s first three fiscal quarters is slightly ahead of the same period in 2016 thanks in large part to gains in the beef and pork segments.

The Springdale-based meat and branded foods company reported early Monday (Aug. 7) third fiscal quarter net income of $447 million, below the $484 million in the same period of 2016. However, earnings per share of $1.21 beat the consensus estimate of $1.18 per share. Net income for the first three fiscal quarters totaled $1.38 billion, just ahead of the $1.377 billion for the same period in 2016.

Total revenue in the third quarter was $9.85 billion, up almost 5% compared with the $9.403 billion in the same period of 2016. The revenue was well ahead of the consensus estimate of $9.48 billion. Total revenue for the first three fiscal quarters was $28.115 billion, ahead of the $27.725 billion in the same period of 2016.

Tyson Foods President and CEO Tom Hayes said beef and pork segment sales continue to deliver the cash need to “fuel investments” in the chicken and prepared foods businesses. He said the integration of AdvancePierre, a $4.2 billion acquisition completed in early June, will also help bolster the prepared foods business.

“Our team delivered solid results in our third quarter with three of four segments on a GAAP basis and all four segments on an adjusted basis achieving operating margins in or above their normalized ranges. Our total net sales grew 4.8% compared to third quarter of 2016, and every segment delivered volume growth behind a strong start to grilling season and new product innovation,” Hayes said in the earnings statement.

SEGMENT PERFORMANCE
• Beef
Operating income for the first fiscal nine months was $572 million, a big gain over the $208 million in the same period of 2016. The segment posted sales of $11.015 billion in the first nine months of the fiscal year, slightly below the $11.036 billion in the same period of 2016.

“Operating income increased due to more favorable market conditions as we maximized our revenues relative to the decline in live fed cattle costs, partially offset by higher operating costs,” the company noted in the earnings report.

• Pork
Operating income for the first fiscal nine months was $524 million, ahead of the $420 million in the same period of 2016. The segment posted sales of $3.876 billion in the first nine months of the fiscal year, better than the $3.674 billion in the same period of 2016.

“Operating income increased as we maximized our revenues relative to the live hog markets, partially attributable to stronger export markets and operational and mix performance, which were partially offset by higher operating costs,” the company noted.

• Chicken
Operating income for the first fiscal nine months was $790 million, well below the $1.085 billion in the same period of 2016. The segment posted sales of $8.374 billion in the first nine months of the fiscal year, above the $8.116 billion in the same period of 2016.

“Operating income for the nine months and third quarter of fiscal 2017 was below prior year record results due to higher operating costs which included increased marketing, advertising and promotion spend and compensation and benefit integration expense of $35 million and $5 million for the nine months and third quarter of fiscal 2017, respectively,” the company noted.

Also, two plant fires cost the company $24 million in costs and reduced sales in the nine month period.

• Prepared Foods
Operating income for the first fiscal nine months was $451 million, below the $601 million in the same period of 2016. The segment posted sales of $5.59 billion in the first nine months of the fiscal year, slightly ahead of the $5.509 billion in the same period of 2016.

The company said a $52 million loss related to a San Diego facility, and $21 million in costs related to the AdvancePierre acquisition were a drag on the segment.

OUTLOOK
Fiscal 2017 sales are projected to be above $38 billion thanks to projected sales volume growth in all segments, the company noted in the earnings report.

Fiscal 2018 sales are projected to reach $41 billion.

“The expected increase in fiscal 2018 sales is attributed to incremental AdvancePierre sales of $1.15 billion, increase in sales volume in our legacy businesses and an increase in pricing predominantly in our Chicken segment, partially offset by the exclusion of sales from the three non-protein businesses referenced above,” the company noted.

Tyson Foods’ shares (NYSE: TSN) closed Friday at $63.30, and were trading almost 6% higher in early Monday trading. During the past 52 weeks the shares have traded between $77.05 and $55.72.

Talk Business & Politics will update this story later today.