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Tyson Shares Drop as Beef Price Increase Outpaces Chicken Demand
Tyson Foods (TSN) shares fell 6% on Monday after the company missed estimates in its latest quarterly earnings report.
Adjusted earnings per share of $0.85 were down 70% year over year, well below expectations of $1.33. Revenue slightly missed expectations of $13.52 billion, with a reported $13.26 billion. Speaking to analysts, CEO and President Donnie D. King said, “Market dynamics and some operational inefficiencies have had an impact [our] Profitability,” in the fiscal first quarter results.
Consumers are buying fewer proteins, including chicken, beef and pork. This change in consumer behavior resulted in falling prices for many products, resulting in Tyson Foods paying more and offering more while consumers paid less due to weaker demand.
“Volume increases of 2.9% were helped by improved staffing for higher throughput, while average selling price fell 8.5% due to weaker domestic demand for beef,” said John R. Tyson, Tyson Foods CFO, on the conference call of the company company.
Beef sales for the Mega Food Processor were $4.7 billion, down 5.6% year over year.
WASHINGTON, DC – APRIL 28: A man shops in the meat aisle at a grocery store, April 28, 2020 Washington, DC. Meat industry experts say beef, chicken and pork could be in short supply in the United States as many meat processing plants have been temporarily closed due to the coronavirus pandemic. Tyson Foods ran a full-page ad in several major American newspapers over the weekend, warning that the food supply chain was on the verge of collapse. (Photo by Drew Angerer/Getty Images)
Higher cattle costs of $530 million also hit the company.
“We saw higher cattle prices as cattle herd numbers continued to decline. We will continue to monitor the value of the beef trimming and align our offering with customer demand at a time of tightening margins while driving volume growth in case-ready and premium branded products,” said Chief Financial Officer John Tyson.
However, Tyson Foods remains bullish on beef.
However, Tyson remains bullish on beef. “We have reason to believe in our long-term prospects for beef. This prospect is supported by our investments in strategic supplier relationships that offer higher quality beef, growing global demand, particularly in Asia, and strengthening drop credits and opportunities to move our beef products up the value pyramid.”
Pork was also down last quarter. Revenue in that segment fell 6% to $1.5 billion. The average selling price of pork rose 1.4% while volume fell 7.4%.
Chicken sales hit a record high of $4.3 million, up 9.6% year over year. A volume increase of 2.5% and a price advantage of 7.1% led to higher sales.
However, CEO King said that “a few different things didn’t go as planned” with its chicken segment.
“Most importantly, demand has not appeared in the parts of the market where we expected. As a result, we had to move things around, and we experienced higher costs, a lower pricing environment, and knock-on effects from a network perspective.”
For fiscal 2023, the company maintained its guidance for total company revenue of $55 million to $57 billion, implying revenue growth of 3% to 7%. Tyson Foods also expects future beef margins “to be in a normalized range of 5% to 7% over the long term, but due to “current market dynamics” the company has changed this to 2% to 4%.
It also lowered its pork margin guidance to 0% to 2%. “Contrary to normal seasonality for our pork segment, we expect the back half of the year to outperform the first half,” he said.
Tyson Foods shares are down more than 31% year over year.
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Brooke DiPalma is a reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at [email protected]
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