Tyson Foods Inc.
) third-quarter 2012 earnings of 50 cents per share missed the
Zacks Consensus Estimate of 55 cents by 9.1%. Quarterly earnings
also declined 2% over the prior-year quarter due to rising input
costs and soft demand for meat in U.S.
Revenue and Margins
Net sales grew a marginal 0.7% to $8.3 billion in the quarter,
but missed the Zacks Consensus Estimate of $8.7 billion. Sales
growth in the Chicken segment was offset by declines in the other
three segments -- Beef, Pork and Prepared Foods.
Tyson's operating income went up by 7.7% to $336 million in the
quarter. Quarterly operating margin stood at 4.0% of net sales.
Sales increased 3.6% y/y in the
segment to $2.9 billion. Sales volume dropped 4.1% due to a
decrease in domestic production in order to match the declining
Operating margin went up to 5.3% in the Chicken segment against
1.4% in the year-ago quarter, portraying positive pricing,
operational efficiencies as well as improved mix.
Sales in the
segment went down 0.7% year over year to $3.48 billion. Sales
volume contracted 13.9% in the quarter due to low demand for beef
products. Operating margin contracted 200 basis points to 2.0% due
to increase in cattle feed cost.
segment revenue slipped 4.7% year over year to $1.3 billion.
Operating margin contracted 370 basis points to 5.1% from the
year-ago quarter due to lower average sales price coupled with
reduced domestic demand.
sales declined 5.2% to $764 million compared with $804 million in
the year-ago quarter. Operating margin however expanded 250 basis
points to 6.2%, fueled by mix changes and lower raw material
Tyson lowered its previously provided fiscal 2012 revenue
guidance in response to weak U.S. demand for meat. The company
reduced its sales guidance by $1.0 billion to $33.0
billion for fiscal 2012.
Tyson believes that overall domestic protein (chicken, beef,
pork and turkey) production will decrease in fiscal 2013 from 2012
levels due to high cost for cattle feed owing to the prevailing
drought conditions in the U.S.
The company projects capital expenditure of $700 million in
fiscal 2012 compared with the previous target of $800-$850 million.
For fiscal 2013, capital expenditure is estimated at $500-$550
Further, the company expects a net interest expense of
approximately $340 million in fiscal 2012 and $130 to $140 million
in fiscal 2013.
We are encouraged by Tyson Foods' significant presence in the
international market. The company has advanced processing
capabilities. However, the company faces stiff competition from
both national and regional players like
Smithfield Foods Inc.
Pilgrim's Pride Corporation
Currently, we have a Zacks #3 Rank on Tyson, which translates
into a short-term Hold rating. On a long-term basis, we provide a
Neutral recommendation on the stock.
PILGRIMS PRIDE (PPC): Free Stock Analysis
SMITHFIELD FOOD (SFD): Free Stock Analysis
TYSON FOODS A (TSN): Free Stock Analysis Report
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