Tyson Foods Inc.
) fourth quarter 2012 adjusted earnings (excluding impairment
charges) of 55 cents per share beat the Zacks Consensus Estimate
of 43 cents by 27.9%. Quarterly earnings also increased
significantly over the prior-year quarter earnings of 26 cents
due to input cost reduction and operating efficiencies.
Revenue and Margins
Net sales was flat at $8.4 billion in the quarter, but missed
the Zacks Consensus Estimate of $8.5 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 93.0% to $332 million in the
quarter. Quarterly operating margin stood at 4.0% of net sales,
as compared with 2% of net sales, due to operating
Sales increased 5.5% year over year in the Chicken segment to
$3.02 billion. However, sales volume dropped 3.5% due to a
decrease in domestic production in order to match the declining
Operating margin went up to 3.8% in the Chicken segment
against a negative 2.9% in the year-ago quarter, portraying
positive pricing, operational efficiencies as well as improved
Sales in the Beef segment went down 2.4% year over year to $3.43
billion. Sales volume contracted 12.5% in the fourth quarter due
to reduced processing of live cattle and increased purchases of
outside tallow. Operating margin remained flat at 3.4% due to
increase in cattle feed cost.
The Pork segment revenue slipped 7.8% year over year to $1.32
billion. Sales volume increased 5.0% due to strong export demand.
However, operating margin contracted 270 basis points to 5.2%
from the year-ago quarter due to less pork margins owing to the
excess domestic availability of pork products.
Prepared Foods sales declined 2.7% to $805 million compared with
$827 million in the year-ago quarter. Operating margin however
expanded 140 basis points to 4.8%, fueled by lower raw material
costs and higher average sales prices, which were partially
offset by lower volumes and increased operational costs.
Fiscal 2012 Results
The company's fiscal 2012 adjusted earnings of $1.91 per share
beat the Zacks Consensus Estimate of $1.76 per share. Quarterly
earnings increased 1.1% over the prior-year earnings of $1.89 per
Net sales increased 3.1% to $33.3 billion in fiscal 2012, but
missed the Zacks Consensus Estimate of $33.4 billion. The company
also missed the company's sales guidance of $33.0 billion
provided in the last quarter. All the segments performed well in
Other Financial Details
The company repurchased 12.5 million shares for $230 million
in fiscal 2012, with 35.2 million shares remaining as of
September 29, 2012, authorized for repurchases.
On November 15, 2012, the company's board declared a special
dividend of 10 cents per share on Class A common stock and 9
cents per share on Class B common stock. Additionally, the board
increased the quarterly dividend by 25%. Both the special
dividend and the increased quarterly dividend will be paid on
December 14, 2012, to shareholders as of November 30, 2012.
The board also declared a quarterly dividend of 5 cents per
share on Class A common stock and 4.5 cents per share on Class B
common stock, which will be paid on March 31, 2013, to
shareholders as of March 1, 2013.
Tyson believes that overall domestic protein (chicken, beef,
pork and turkey) production will decrease by 2% in fiscal 2013
from 2012 levels due to increased costs for cattle and hog
producers owing to the drought conditions of summer of 2012 in
For fiscal 2013, the company expects sales to increase to
approximately $35 billion, driven by anticipated price increases
related to decreases in domestic availability of protein and
rising raw material costs.
The company projects capital expenditure of $550 million in
fiscal 2013, which is at the higher end of the previous range of
$500-$550 million. Tyson also expects interest expense of $140
million for fiscal 2013, at the higher end of the previous range
of $130 to $140 million.
We are encouraged by Tyson's 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
Pilgrim's Pride Corporation
We currently have a long-term Neutral recommendation on
Smithfield. The stock carries a Zacks #3 Rank (a short-term Hold
rating), following mixed results in the fourth quarter. A peer
Smithfield Foods Inc.
) also carries a Zacks #3 Rank.
PILGRIMS PRIDE (PPC): Free Stock Analysis
SMITHFIELD FOOD (SFD): Free Stock Analysis
TYSON FOODS A (TSN): Free Stock Analysis
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