Tyson shares sink on full-year warning

Shares were not yet active in premarket trade, but are up 10.6% in the year so far, while the S&P 500 has gained 2.2%. On a per-share basis, earnings rose to 83 cents from 73 cents.

Sales grew to $10.07 billion from $9.68 billion in the same period for 2014.

Lastly, despite lowering full-year guidance for 2015, Tyson Foods management team believes 2016 will be a good year and that the company can post at least 10% annual earnings per share growth over time. Tyson cut its outlook to a range of $3.10-$3.20 per share. “So, we’re excited about the opportunities there, not just for the short term but for the longer term, as well”.

Tyson, one of the largest beef packers in the US, processing more than 130,000 head of cattle per week, cited the challenging market conditions now faced by its beef division as the reason for the downgrade in the company’s earnings guidance.

The company probably sold beef at extremely low prices to clear its supply backlog from the West Coast port disruption, JP Morgan analyst Ken Goldman wrote in a note.

Tyson is now covered by 11 Wall Street analysts.

With fewer cattle available, prices went up. Pressed by analysts to explain how Tyson’s beef struggles compared with competitors, Smith declined. “We anticipate our retail margins will moderate a bit in the fourth quarter as we spend against the national launches of Hillshire Snacking and Ball Park Jerky, as well as increased MAP spending behind innovation in the base business”. Cutting costs by eliminating duplicated efforts and other cost-saving initiatives could yield another $400 million in 2016.

For the most recent quarter, Tyson said its adjusted earnings were 80 cents per share, missing the 92 cents per share analysts had forecast.

Commenting on the strength of the chicken and prepared foods segment, Donnie Smith, president and chief executive officer of Tyson Foods, said, “The Prepared Foods and Chicken segments performed very well in the fiscal third quarter while managing numerous challenges”.

Tyson also said it’s on track to achieve approximately $300 million in synergy cost savings during the 2015 fiscal year. Adjusted operating income for the quarter was $197 million.

“Volume was up 77%, reflecting the addition of Hillshire Brands, and average sales price was up 13%”, Mr. Smith said. Also, EVP Howell P. Carper sold 87,333 shares of the company’s stock in a transaction on Thursday, June 18th.