Tyson Foods Inc. Earnings Cheat Sheet: Margins Shrink on Rising Costs, Net Income Falls

Rising costs hurt S&P 500 (NYSE:SPY) component Tyson Foods Inc. (NYSE:TSN) in the third quarter as profit dropped from a year earlier. Tyson Foods, Inc. and its subsidiaries produce, distribute and market chicken, beef, pork, prepared foods and related products.

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Tyson Foods Earnings Cheat Sheet for the Third Quarter

Results: Net income for the meat products company fell to $196 million (51 cents per share) vs. $248 million (65 cents per share) a year earlier. This is a decline of 21% from the year earlier quarter.

Revenue: Rose 10.9% to $8.25 billion from the year earlier quarter.

Actual vs. Wall St. Expectations: TSN beat the mean analyst estimate of 41 cents per share. Analysts were expecting revenue of $8.28 billion.

Quoting Management: “We are pleased that our overall performance in the fiscal third quarter was about what we expected it to be,” said Donnie Smith, president and chief executive officer of Tyson Foods. “The Pork segment’s returns were above the new normalized range; the Beef segment was near the upper end of its range; and our Prepared Foods segment was just under its range. “We feel good about our performance in the Chicken segment while experiencing extremely volatile input costs and market prices at or near historical lows. The fact that we remained profitable in such a difficult environment demonstrates how much our chicken business has improved in the past three years. There appears to be improvement in market fundamentals on the horizon, but the next few months will be very challenging, and it is likely our Chicken segment will experience a loss in the fiscal fourth quarter. “My outlook for Tyson Foods remains positive. Our diversified business model, including our outstanding Beef and Pork segments, along with our strong balance sheet, will allow us to continue serving our customers through insights and innovations as we help them succeed in this economic environment, reinvesting in our business and buying back stock.”

Key Stats:

Gross margin shrank 3.7 percentage points to 6.4%. The contraction appeared to be driven by increased costs, which rose 15.4% from the year earlier quarter while revenue rose 10.9%.

Revenue has risen the past four quarters. Revenue increased 15.7% to $8 billion in the second quarter. The figure rose 14.8% in the first quarter from the year earlier and climbed 3.1% in the fourth quarter of the last fiscal year from the year-ago quarter.

The company topped expectations last quarter after falling short of forecasts in the second quarter with net income of 42 cents versus a mean estimate of net income of 43 cents per share.

Competitors to Watch: Smithfield Foods, Inc. (NYSE:SFD), Hormel Foods Corporation (NYSE:HRL), Sanderson Farms, Inc. (NASDAQ:SAFM), Pilgrim’s Pride Corp. (NYSE:PPC), ZHONGPIN INC. (NASDAQ:HOGS), ConAgra (CAG) and Seaboard Corporation (AMEX:SEB).

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(Source: Xignite Financials)

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