Springdale, AR - Tyson Foods Inc. said its fiscal first-quarter profits grew 24% from a year earlier, surpassing analysts' estimates, thanks to record sales and low feed costs.
Tyson, which controls more than a quarter of the U.S. chicken market, said it earned $55.8 million, or 24 cents per diluted share, in the quarter ended January 2, compared with $44.9 million, or 21 cents, a year ago. Wall Street analysts had forecast 21 cents per share, according to First Call Corp., which tracks such estimates.
The company said first-quarter sales grew by 20%, to a record $1.82 billion from $1.52 billion a year earlier.
The increase was primarily due to volume gained from the acquisition of Hudson Foods in January 1998 and the inclusion of Tyson de Mexico on a consolidated basis. Low prices for corn and soybean meal -- key poultry feed ingredients -- also bolstered profit margins.
“I thought (the earnings) were encouraging,” said John McMillin, food industry analyst with Prudential Securities.
“This company has had very little earnings growth over the last five years,” he added. “I think they're starting to come out of their long earnings rut.”
“I'm particularly pleased with the results of our poultry business,” Wayne Britt, Tyson chief executive officer, said in a statement. “The combination of favorable grain and poultry market conditions more than offset the depressed leg quarter markets that we have been experiencing.”
Historically, Tyson has exported a large portion of its dark meat leg quarters to Russia and other areas. Economic turmoil has sapped some of that demand, forcing Tyson to find other outlets in the United States where demand for white meat far outstrips dark meat.
Another rough area for Tyson this quarter was its swine business. Heavy hog supplies sent U.S. prices tumbling to the lowest level since World War II, slashing profits for Tyson. While prices have recovered, livestock analysts have forecast another year of tough pricing.
Tyson's Britt said of the swine operations, “These operating results serve to reaffirm our decision to focus our attention on our core poultry business.”
Analysts said Tyson appeared to be stepping up efforts to sell the swine unit, which one analyst valued at about $200 million.
“I think there is no question that if it doesn't have feathers on it, Tyson would rather reorient its product line,” said Leonard Teitelbaum, an analyst with Merrill Lynch.
“They're not going to give anything away, and it will be on their timetable, but they want to concentrate on what they do best,” Teitelbaum said.
Tyson shares closed up 37.5 cents at $21.31 on the New York Stock Exchange.
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