United States-Tyson Foods Inc the worlds largest meat processor.
Tyson Foods Inc., the world’s largest meat producer, reports results for its fiscal second quarter on Monday before the market opens. The following is a summary of key developments and analyst opinion related to the period.
OVERVIEW: Tyson and others in the meat industry continue to cope with costs for key ingredients like corn that reached record highs last summer.
As cash-strapped consumers keep a lid on restaurant spending, that hurts sales, which in turn weakens pricing power for companies because it leads to an oversupply of meat on the market. But companies are cutting production and analysts say the industry is poised for improvement.
Last month, Springdale, Ark.-based Tyson announced it would close a meat processing plant in Ponca City, Okla., meaning the possible elimination of 580 jobs. It will shift production from the plant, which makes deli-style luncheon meats and ham products, to plants in Buffalo, N.Y., Cherokee, Iowa and Houston.
It’s the company’s sagging chicken segment that has been hurting profits. But executives said earlier this year that Tyson expects to return to profitability within two quarters. Analysts expect a loss for this quarter, though, as the high costs keep weighing on profits.
BY THE NUMBERS: Analysts polled by Thomson Reuters expect the company to post a loss of 5 cents a share, excluding one-time items, on revenue of $6.64 billion for the quarter that ended in March.
ANALYST TAKE: Barclays Capital agribusiness analyst Christopher Bledsoe says there are clear signs the downturn in the meat cycle is bottoming as companies cut production, and that means Tyson has better days ahead. He warns that the swine flu — which could depress pork demand worldwide and hurt pricing — adds risk to the upturn, however. About 20 percent of the company’s revenue comes from pork, 45 percent comes from beef, the rest from chicken.
WHAT’S AHEAD: The drop in commodity costs is helping pad margins. The company plans to go after consumers eating at home during the recession with fancier foods that look like they could come from a restaurant.
STOCK PERFORMANCE: Tyson’s shares gained 7 percent during the quarter to finish at $9.39. They closed Wednesday at $10.24.
