Tyson Foods Q3 Profit Up 32%, But Results Miss View; Lowers 2015 Outlook

(RTTNews) - Meat products maker Tyson Foods, Inc. (TSN) on Monday reported a 32 percent increase in profit for the third quarter from last year on sales growth amid higher volume and pricing.

However, revenue as well as adjusted earnings per share for the quarter missed analysts' expectations and the company lowered its earnings outlook for fiscal 2015, reflecting weakness in the company's beef business. The company's shares are down more than 8 percent in pre-market activity.

Donnie Smith, president and chief executive officer of Tyson Foods said, "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."

Tyson Foods' third-quarter net income attributable to the company rose to $343 million or $0.83 per share from $260 million or $0.73 per share in the year ago quarter.

Adjusted net income for the quarter was $0.80 per share, compared to $0.75 per share in the prior-year period. On average, ten analysts polled by Thomson Reuters expected earnings of $0.92 per share. Analysts' estimates typically exclude special items.

Sales for the quarter increased 4 percent to $10.07 billion from $9.68 billion in the year-ago quarter. Analysts were looking for revenues of $10.30 billion.

Total sales volume during the quarter rose 3.4 percent from last year, while average price increased 0.6 percent.

The company noted that the Prepared Foods and Chicken segments performed very well in the fiscal third quarter, partially offsetting soft results in the Beef and Pork segments. During the quarter, sales volume of chicken increased 2.9 percent and prepared foods volume surged 77.4 percent.

Meanwhile, sales volume of beef in the quarter were down 3.9 percent due to a reduction in live cattle processed, while pork volumes declined 4.8 percent due to the divestiture of the company's Heinold Hog Markets business.

International operations volume decreased 25.3 percent, reflecting the sale of the company's Brazil operations and weak demand in China.

Tyson Foods plans to start buying back stock in the fourth quarter as it expects to be ahead of schedule on reaching leverage ratio goals.

Further, the company noted that synergy capture from the integration of Hillshire Brands was going extremely well and it was now on track to achieve synergies of about $300 million in fiscal 2015, up from the prior expectation for savings of $250 million.

Looking ahead to fiscal 2015, Tyson Foods said it will not achieve its previous earnings guidance unless beef market conditions improve rapidly. The company now forecasts adjusted earnings of $3.10 to $3.20 per share, down from the prior range of $3.30 to $3.40 per share.

The company expects sales to approximate $41 billion for fiscal 2015 and fiscal 2016, respectively.

The Street expects the company to earn $3.44 per share for the year on revenues of $41.72 billion.

For fiscal 2016, Tyson Foods said it expects domestic protein production to increase about 3 percent from fiscal 2015 levels. Grain supplies are expected to decrease, which should result in higher input costs as well as increased costs for cattle and hog producers.

The company also expects to increase share repurchases under its share repurchase program in fiscal 2016. At the end of the third quarter, 27.9 million shares remained authorized for repurchases.

TSN closed Friday's trading at $44.35. In Monday's pre-market activity, the stock is down $3.77 or 8.50 percent to $40.58.