[ACCESSWIRE]
LONDON, UK / ACCESSWIRE / August 12, 2016 / Active Wall St. announces its post-earnings coverage on Tyson Foods, Inc. (NYSE: TSN). The company posted its third quarter 2016 earnings on August 08, 2016. The largest meat processor in the U.S. raised its profit forecast for the fiscal year 2016, driven by robust consumer demand and declining livestock costs, as its earnings topped expectations. This is the second time in the past three months the company raised its guidance. Register with us now for your free membership at: http://www.activewallst.com/register/.
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Earnings Reviewed
For the quarter ended on July 2, 2016, Tyson posted earnings of $484 million, or a record $1.25 per share, which was 51% higher from earnings of $343 million, or $0.83 per share, reported in the year ago period. On an adjusted basis, the company reported earnings of $1.21 per share compared to the year earlier earnings of $0.80 per share, beating analysts' estimates of $1.06 per share. The company generated revenue of $9.40 billion, edging past analysts' estimates of $9.33 billion.
Donnie Smith, CEO of Tyson Foods, said in a press release:
"We again demonstrated our ability to deliver higher, more stable earnings through our differentiated business model that emphasizes growth in prepared foods and value-added chicken."
"We produced record third quarter earnings per share, operating income and return on sales. All operating segment results were in or above their normalized operating margin ranges, with the Chicken segment delivering a record 13.9% return on sales," he further added.
Segment Details
During Q3 FY16, Tyson Foods' Chicken segment reported sales of $2.74 billion, which declined marginally from the year ago period as a 0.9% dip in sales volume, due to the company's strategy of optimizing its mix which was offset by a 0.4% gain in average selling price (ASP) as a result of sales mix changes. Feed costs decreased $50 million during the third quarter of fiscal 2016. Operating income in the company's chicken division, its biggest source of profits, climbed 21% to $380 million in Q2 FY16.
Sales at the company's Beef segment declined 12.12% on a y-o-y basis to $3.78 billion, as 2.9% increase in sales volume was offset by a 14.6% decrease in ASP, driven by higher domestic availability of fed cattle supplies.
Tyson Foods' Prepared Foods segment reported sales of $1.80 billion as 1.9% gain in volume was offset by an equal decline in ASP.
Economic Boom & Revamp showing Results
Donnie Smith attributed Tyson Foods' stellar performance to steps taken by the company in a bid to make changes in the way it does business; altering the system it procures chicken to its presence in grocery-store aisles, expanded through the acquisition of Hillshire Brands in a $7.7 billion deal. The company has also been working to focus more towards packaged meat products such as premium chicken sausages, which carry more margin, and to reduce its reliance on shrink-wrapped meats.
The Springdale, Arkansas headquartered company has also benefited from robust consumer spending, increased cattle supplies, and low prices for animal feed. Mr Smith noted that improving economic conditions, where unemployment rate is going lower and gasoline prices are in a prolonged slump, are improving consumers' appetite for meat, thus resulting in an increase in spending at fast-food chains which are big Tyson Foods clients.
Share Repurchase
Tyson Foods stated that that from the strong cash flows generated by operations, the company used $425 million to repurchase 6.6 million shares during Q3 FY16. The company noted that it is continuing the share repurchases and have bought back an additional $380 million worth of shares as of 08 August, 2016.
Outlook
Tyson Foods raised its full-year profit forecast to a range of $4.40 to $4.50 per share on an adjusted basis as compared with its prior guidance range of adjusted earnings of $4.20 to $4.30 per share given in May 2016. Analysts were projecting for adjusted earnings of $4.36 per share. The company said it is anticipating domestic protein production (chicken, beef, pork, and turkey) to increase about 2% to 3% from FY 2016 levels in FY 2017.
Stock Performance
Tyson Foods shares ended yesterday's trading session at $74.57, slightly down 0.09% from its previous close. A total volume of 2.28 million shares were traded for the day. The company's share price has advanced 40.47% from the start of the year and was up 78.13% for the last twelve months.
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