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Tyson Foods (TSN) Q4 Earnings Double; Sales Down, Margins Improve

 November 19, 2012 08:04 AM

(By Balachander) Tyson Foods Inc.(NYSE: TSN) reported quarterly profit that nearly doubled from last year as margins improved, while sales fell as volume declined at its beef and pork segments. Earnings topped market expectations, but sales trailed consensus.

The Springdale, Arkansas-based company has been hit by decreased domestic demand for chicken and beef coupled with higher feed ingredient costs.

Sales volumes at beef and chicken segments declined 12.5 percent and 3.5 percent respectively, for the fourth quarter.

Earnings attributable to Tyson surged to $185 million or $0.51 per share for the fourth quarter from $97 million or $0.26 per share in the year-ago quarter. Adjusted earnings per share (EPS) more than doubled to 55 cents to 26 cents.

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Sales edged 0.4 percent lower to $8.37 billion for the three months ended September.

Wall Street analysts, on average, expected earnings of 44 cents per share on sales growth of 1.00 percent to $8.49 billion.

Gross margins improved to 6.8 percent, versus 4.7 percent in the year-ago quarter.

Cost of sales fell 2.6 percent.

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.

"Our earnings for the fourth quarter and fiscal year indicate that Tyson Foods is rising above the noise of commodity markets to produce solid, more consistent results," Donnie Smith commented on fourth-quarter results. "Fiscal 2013 is likely to be equally if not more difficult, but there will always be challenging circumstances in this business."

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In the preceding third quarter, Tyson Foods delivered lower earnings due to a loss of $167 million on early extinguishment of debt and the meat processor warned of lower 2012 profit amid softer-than-expected domestic demand for protein.

Looking ahead for the full year 2013, Tyson currently forecasts sales of roughly $35 billion, up from $33.28 billion in 2012, while analysts' expect $34.87 billion.

Tyson declared a special dividend of $0.10 per share on Class A common stock and $0.09 per share on Class B common stock. Also, the company increased the quarterly dividend to $0.05 on Class A common stock and $0.045 on Class B common stock. Both the special dividend and the increased quarterly dividend are payable on December 14, 2012, to shareholders of record at the close of business on November 30, 2012.

One of the company's key competitors is Hormel Foods (NYSE: HRL), which will report its quarterly earnings on Tuesday. Wall Street expects Hormel Foods to earn 50 cents a share on revenue of $2.23 billion for the fourth quarter.

TSN shares closed Friday's regular trading at $16.88. The stock has been trading in the 52-week range between $14.06 and $21.06.



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