Tyson Climbs Most Since 2012 After Profit Exceeds Estimates

Jan 31, 2014 4:13 pm ET

(Updates with closing share price in fifth paragraph.)

Jan. 31 (Bloomberg) -- Tyson Foods Inc., the second-largest U.S. pork producer, jumped the most in 14 months as profit exceeded analysts’ estimates and the company forecast further growth this year and next.

Tyson gained the most since November 2012 after reporting per-share profit of 72 cents for the three months through December, helped by higher chicken and beef sales. That exceeded the 64-cent average of 11 estimates compiled by Bloomberg.

The producer forecast fiscal 2014 sales of $36 billion, higher than the average estimate of $35.7 billion. Tyson is “confident” of delivering growth in earnings per share this year in excess of 23 percent and at least 10 percent in 2015, Chief Financial Officer Dennis Leatherby said on a conference call with analysts today.

“This growth trajectory is better than we had anticipated,” Brett Hundley, a Richmond, Virginia-based analyst for BB&T Capital Markets who recommends buying the shares, said in a report today. Tyson “is proving that it can navigate market challenges, volatility through adept management, improved business practices, and a diversified portfolio.”

Tyson rose 8.4 percent to $37.40 at 4:01 p.m. in New York. The shares have increased 69 percent in the past 12 months.

Hog Supplies

One of the challenges Tyson faces in the coming year is a virus spreading through U.S. hog herds. Industry hog supplies this year will drop about 3 percent, with higher animal weights offsetting some of the headcount reduction, the company said in its earnings statement. In November, the company said it expected industry hog supplies to rise as much as 2 percent in the 12 months through September 2014.

The disease, called porcine epidemic diarrhea virus, was detected in the U.S. in May and has spread to 23 states as well as the Canadian provinces of Ontario and Quebec. The recent extreme cold is helping the disease spread and pushing up hog prices, Farha Aslam, a New York-based analyst for Stephens Inc., said in a report on Jan. 28.

“We do expect to see wholesale prices increase,” James V. Lochner, Tyson’s chief operating officer, said on a conference call with analysts today. While Tyson doesn’t “anticipate any issues” at its processing plants, the impact of lower supply may be seen in the summer, he said.

As updates on the virus become available, Tyson is “just staying very on top of it, region-to-region, producer-to- producer,” Lochner said.

Tyson’s pork segment, which ranks behind beef and chicken by sales, made up 15 percent of revenue last year and 24 percent of operating income. The operating margin for pork will be in its “normalized range” of 6 percent to 8 percent in fiscal 2014, the company said.

Smithfield Foods Inc., a unit of China’s Shuanghui International Holdings Ltd., is the largest pork processor.

--With assistance from Elizabeth Campbell in Chicago. Editors: Stephen Cunningham, Steven Frank