Beef sales suffering at Tyson Foods

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.

The company reported record adjusted operating income of $568 million, or 80 cents per share, up 39 percent from $407 million, or 75 percent share. Stephens set a $50.00 target price on Tyson Foods and gave the company a buy rating in a research note on Tuesday, May 5th. Revenue rose 4 percent to $10.1 billion, trailing the $10.3 billion average estimate.

Analysts on average had expected earnings of 92 cents per share on revenue of US$10.3 billion, as stated by Thomson Reuters I/B/E/S.

Shares in the US meat giant tumbled by 9.5% to $40.16 in morning deals in New York.

The Springdale, Arkansas-based company posted quarterly net income of $344 million, or $0.83 per share, compared to $258 million, or $0.73 per share, in the year-ago quarter. The firm has a market capitalization of $18.00 billion and a price-to-earnings ratio of 17.26. “The prepared foods and chicken segments performed very well in the fiscal third quarter while managing numerous challenges”. The stock has increased 20 percent in the last 12 months. Tyson’s beef business has turned unprofitable on high costs, and the chicken business is expected to become far less profitable on lower chicken prices.

The company said it now anticipates increased cost savings from the Hillshire acquisition and lifted that estimate to $300 million for the 2015 business year.

“While we are pleased with the performance of our business overall, unless beef market conditions improve rapidly, we will not achieve our previous guidance…” he said. Analysts expected EPS of $0.92.

For fiscal year 2016, the company expects domestic protein production (chicken, beef, pork and turkey) to rise by about 3% year-over-year.

Tyson Oresident and CEO Donnie Smith said in a statement that the company’s earnings results were affected by high cattle costs.

TSN closed Friday’s trading at $44.35.