020142 Tyson Foods First-Quarter Earnings RiseJanuary 28, 2002Chicago -- Tyson Foods Inc. said fiscal first-quarter earnings jumped nearly five-fold, boosted by the added sales from its newly acquired IBP beef business. Net income at the Springdale, Arkansas-based company rose to $126.9 million, or 36 cents a share, in the quarter ended Dec. 29, from $27.0 million, or 12 cents, a year earlier. Earnings beat Wall Street expectations and met the high end of the company's revised numbers provided earlier this month. Tyson purchased Dakota Dunes, South Dakota-based IBP, the largest U.S. producer of beef, in late September, and results now include 100% of IBP's operations. Revenue climbed to $5.86 billion from $1.77 billion year ago, with sales of beef, now Tyson's largest segment, weighing in at $2.55 billion, on an operating margin of 1.9%. "I think so far so good," said Prudential Securities food analyst John McMillin. "There are still some issues to worry about, but I think people are starting to see a better company emerging, one that can grow with the Wal-Marts of the world." Shares of Tyson were up 28 cents at $12.38 in afternoon New York Stock Exchange trade. McMillin believes the stock remains "a little unappreciated in the marketplace," and he has a $16- a-share price target. Tyson boosted its earnings outlook for the full year to a range of $1.10 to $1.20 a share, as it starts to benefit from integrating IBP's operations, such as putting IBP's trucks on Tyson's routes and vice versa. Consensus estimates from First Call pegged fiscal 2002 earnings at $1.10 a share. However, the company reined in expectations for the fiscal second quarter, with a range of 17 cents to 20 cents a share, below analysts' average forecast of 26 cents. The second-quarter reduction was due to excess supply in the meat industry, which has pressured prices, said Midwest Research analyst Christine McCracken. "There's just a lot of meat available now," McCracken said. "On the whole, the second quarter is going to be a little bit weaker." QUARTERLY RESULTS In the first quarter, Tyson's beef volumes fell slightly, in part because of lessened demand for steaks in restaurants after the Sept. 11 attacks, company executives said during a conference call on Monday. Market share gains in November and December did not overcome October declines. Tyson continues to boost its beef margins by adding more branded, ready-to-eat beef under IBP's Thomas E. Wilson label. Chicken sales rose 6.9% to $1.77 billion on an operating margin of 7.8%. Operating income rose, as the company reduced its costs and rolled out more value-added products. "Tyson has made a number of positive moves to improve the mix of products, more toward the processed and higher-value chicken products," McCracken said. "They've improved the mix and it's resulted in a more profitable operation, particularly in chicken." Pork segment sales, helped by IBP, jumped to $688.8 million from $38.0 million a year earlier. Tyson, which is facing conspiracy charges from the federal government alleging that it violated U.S. immigration laws by smuggling lower-paid, illegal immigrants into its plants, said it is unable to determine its liability at this time. The company pleaded not guilty to charges in a Tennessee federal court last week. In the quarter, Tyson was expected to earn 34 cents to 35 cents a share in the quarter with an average at 35 cents, according to Thomson Financial/First Call, which tracks earnings. Earlier this month, Tyson said it expected first-quarter earnings of 34 cents to 36 cents a share, well ahead of Wall Street's average of 25 cents. The company said it has reduced its debt by $427.9 million in the quarter and by $550 million since it closed the tender offer for IBP on Aug. 3. The company has long-term debt of $3.9 billion on its balance sheet. Tyson's average number of shares outstanding rose to 354.6 million in the quarter from 223.9 million a year earlier. The company's stock has outperformed the broad Standard & Poor's 500 Index by 18% since September.
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