Higher Costs Trip Up Tyson Foods

Tyson Foods Inc. (NYSE: TSN) reported third-quarter adjusted earnings per share (EPS) of $0.50 and $8.3 billion in revenue before markets opened today. EPS for the same period a year ago totaled $0.46, and last year’s revenue totaled $8.25 billion. The results compare to the Thomson Reuters consensus estimates for EPS of $0.54 and $8.7 billion in revenue.

The company’s president and CEO said:

Our Beef and Pork segments have been operating in very difficult market conditions that will result in our earnings for fiscal 2012 coming in lower than we previously projected. Grain costs have been increasing significantly and rapidly, largely as a result of the on-going U.S. drought. While we ultimately expect to pass along rising input costs, these costs, coupled with continued soft demand, are likely to pressure earnings in 2013.

For the company’s full 2012 fiscal year, which ends in September, Tyson now pegs sales at $33 billion, down $1 billion from it previous guidance and $1.02 billion lower than the consensus estimate. The company also projects fiscal year 2013 sales at $35 billion, also lower than the consensus estimate of $35.4 billion. The company said that it expects beef sales in 2013 to be “adequate” and to remain profitable, but possibly below the usual gross profit level of 2.5% to 4.5%. Chicken sales are expected to be flat in 2013, while sales of pork are forecast above the usual gross profit range of 6% to 8%, and prepared foods will see a price increase as gross profit remains in the normal range of 4% to 6%.

Shares are down about 2.3% in premarket trading today, at $15.05. The current 52-week range is $14.62 to $21.06. Thomson Reuters had a consensus analyst price target of $20.45 before today’s results were announced.

Paul Ausick