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Tyson Foods May Report Lower Q2 Earnings

 May 04, 2012 12:42 PM

(By Mani) Tyson Foods Inc. (NYSE:TSN) is expected to report lower earnings despite higher revenues when it would announce its second quarter results on May 7.

Wall Street expects the company to earn 38 cents a share, a 9.5 percent drop from last year when it earned 42 cents a share. Tyson Foods earnings have come in above Wall Street's view twice in the past four quarters.

The company, however, saw its profit dip for the past four quarters, with 2011's fourth-quarter profit slipping 54 percent from year-ago levels. The trend is expected to continue with the second quarter.

Meanwhile, analysts' sentiment has been waning for the past three months as their consensus earnings estimates have declined from 44 cents 90 days ago to the current 38 cents.

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Quarterly revenues are estimated to increase 6.20 percent to $8.49 billion, according to analysts polled by Thomson Reuters. In the year-ago quarter, TSN generated $8 billion in revenues. Arkansas-based Tyson Foods has managed to deliver an average sales growth of 12.2 percent in the past four quarters.

In the preceding first quarter, Tyson Foods' earnings declined to $156 million, or 42 cents a share, down from $298 million or 78 cents a share, in the same quarter last year. However, sales rose 9.4 percent to $8.3 billion on higher selling prices.

Tyson Foods is suffering from decreased domestic demand for chicken and beef coupled with higher feed ingredient costs. For fiscal 2012, the company expects industry chicken production to decrease about 4 percent, which should gradually improve market pricing conditions.

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Current futures prices indicate higher feed costs in fiscal 2012 compared to fiscal 2011. The company expects to offset the increased feed costs with pricing and mix improvements as well as operational efficiencies and aim to save $125 million in fiscal 2012.

In its beef segment, Tyson Foods expects to see a reduction in fed cattle supplies of 1-2 percent for the remainder of fiscal 2012 and said there may be periods of imbalance of fed cattle supply and demand.

"We have seen difficult margin conditions early in the second quarter of fiscal 2012, but expect them to recover throughout the second-half of the fiscal year. For fiscal 2012, we believe our beef segment will be profitable, returning to our normalized range in the second-half of the fiscal year," the company said in a statement.

Analysts have a mixed opinion on the stock as eight of the 15 analysts rate it as "strong buy" or "buy," while the remaining seven recommend investors to "hold" the stock.

Tyson Foods, led by CEO Donnie Smith, is one of the world's largest processors and marketers of chicken, beef and pork. The company produces a wide variety of protein-based and prepared food products and is the recognized market leader in the retail and food service markets.

One of the company's key competitors is Hormel Foods (NYSE:HRL), which will report its second-quarter earnings on May 23. Wall Street expects Hormel Foods to earn 42 cents a share on revenue of $2.05 billion for the second quarter.

Shares of Tyson Foods have fallen 6 percent during the last three months, while the broader S&P 500 index has gained 3.47 percent in the same period.



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