Tyson Tops Estimates on Rebounding Beef and Pork Demand

(Bloomberg) -- Tyson Foods Inc. posted better-than-expected earnings, with rebounding red-meat demand countering a weaker chicken segment and the impact of higher costs as the biggest U.S. meat producer took steps to control the spread of coronavirus.

Fiscal fourth-quarter adjusted earnings were $1.81 a share, compared with the $1.19 average analyst estimate and $1.21 a year ago, the Springdale, Arkansas-based company said Monday in a statement.

Tyson cautioned that the pandemic may increase costs and affect demand, estimating virus-related costs of $330 million for fiscal 2021.

Its outlook for fiscal 2021 is for strengthening chicken and prepared foods segments and for strong beef and pork segments, but not quite as strong as 2020. The company forecast capital expenditures between $1.2 billion and $1.4 billion. Tyson forecast sales in fiscal 2021 at $42 billion to $44 billion, below the Bloomberg consensus estimate of $44.23 billion.

“We are experiencing multiple challenges related to the pandemic,” the company said in the statement. “These challenges are anticipated to increase our operating costs and negatively impact our volumes into fiscal 2021. We cannot currently predict the ultimate impact that COVID-19 will have on our short- and long-term demand, as it will depend on, among other things, the severity and duration of the COVID-19 crisis.”

Key Takeaways

• For the quarter, beef volumes were up 11.8% and pork up 15.2% while chicken gained only 1.9% and poultry prices slipped 2.3%.
• While production at U.S. meat plants has rebounded from virus-related shutdowns earlier this year, costs have climbed for personal protection equipment, virus testing and worker pay. Meanwhile, sales have been robust at retail and at fast-food restaurants while full-service restaurants and institutional outlets such as schools have lagged.
• Results for the full fiscal year were negatively impacted by about $540 million in direct expenses for the virus, including $200 million for the fourth quarter.
• Rising virus cases boost the risk of another round of shutdowns or slowdowns at U.S. meat plants. That could also mean further cost increases as companies take additional steps to enhance worker safety.
• Dry crop conditions and surging shipments to China have also raised prices for animal feed, hitting margins in the meat industry.
• The company announced on Nov. 10 that it’s building new production facilities in China and Thailand, and expanding its plant in the Netherlands.
• The company said last week that it’s working to reduce deforestation risk in its global supply chain of four commodities, including cattle and beef.

Market Reaction

• The earnings statement was released before the opening of regular trading in New York. Tyson shares were up 1.4% as of 9:50 a.m., and are down 31% this year.

Get More

• Click here for the earnings statement.
• Tyson plans to host a conference call from analysts at 9 a.m. Eastern time. Details here.

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