Tyson Foods Inc.
) delivered better-than-expected second-quarter 2012 earnings of 42
cents per share, exceeding the Zacks Consensus Estimate of 38
cents. However, the earnings lagged the prior-year earnings of
44 cents per share due to decrease in domestic production resulting
from an effort to balance supply with forecasted demand.
Revenue and Margins
Net sales recorded growth of 3.4% to $8.3 billion from $8.0
billion in the year-ago quarter, while it missed the Zacks
Consensus Estimate of $8.5 billion. The upswing came as an outcome
of sales growth across all its segments.
Tyson's operating income declined to $302 million in the quarter
compared with $300 million in the prior-year quarter. Quarterly
operating margin contracted 10 basis points to 3.7%, portraying an
augmented grain and feed ingredient and other raw material
Sales increased in the
segment to $2.9 billion, compared with $2.7 billion in the year-ago
quarter. Sales volume inched down 1.6% on the back of a decrease in
domestic production pounds.
Operating margin came down to 5.0% in the Chicken segment,
compared with 1.4% in the year-ago quarter portraying increases in
grain and feed ingredients costs, partially offset by operational
efficiencies as well as improved mix and pricing.
On a year-ago basis, sales climbed in the
segment to $3.4 billion compared with $3.3 billion. Sales volume
contracted 10.7% in the quarter.
segment revenue slipped to $1.37 billion compared with $1.38
billion in the year-ago quarter. Operating margin contracted to
8.4% from the year-ago quarter.
sales increased to $807 million compared with $778 million in the
year-ago quarter. Operating margin expanded 5.5%, fueled by mix
changes and an increase in average sales prices, partially offset
by an increase in raw material costs and lower volumes.
Other Financial Updates
Tyson exited the quarter with cash and cash equivalents of $857
million. Long-term debt was $2.1 billion and shareholders' equity
was $11.2 billion at the end ofthe second quarter of 2012.
In the second quarter of 2012, the company repurchased 3.6
million shares for approximately $70 million. On May 3, 2012,
Tyson's Board of Directors approved an increase of 35 million
shares authorized for repurchase under this program.
Tyson believes that the overall domestic protein (chicken, beef,
pork and turkey) production is expected to decrease in fiscal 2012
on the back of increased exports.
Fiscal 2012 sales are expected to exceed $34 billion due to
price increases related to decreases in domestic availability of
protein and rising raw material costs.
The company expects to spend around $800-$850 million in fiscal
2012. Further, the company expects a net interest expense of
approximately $190 million, which is lower than the year ago by $41
We are encouraged by Tyson Foods' significant presence in the
international market. The company is vertically integrated and 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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