Companies and Brands
Why Tyson Foods Could Post a New 52-Week High Friday
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Tyson Foods Inc. (NYSE: TSN) reported first-quarter fiscal 2016 results before markets opened Friday. The food processing company posted adjusted earnings per share (EPS) of $1.15 on revenues of $9.15 billion. In the same period a year ago, the company reported EPS of $0.77 on revenues of $10.82 billion. First-quarter results also compare to the Thomson Reuters consensus estimates for EPS of $0.89 and $10.07 billion in revenues.
The strong quarterly results led the company to raise its fiscal year 2016 EPS guidance to a range of $3.85 to $3.95, well above the current consensus analysts’ estimate of $3.63. The company’s board also approved an increase of 50 million shares in the stock buyback program. Tyson repurchased $300 million in shares during the first quarter and has repurchased $200 million to date in its second fiscal quarter (about 3.9 million shares).
When adjusted for one-time items in the comparable quarter last year, Tyson’s operating income rose from $564 million in the first quarter of 2015 to $776 million, an increase of nearly 38%. Adjusted operating margin rose from 5.2% a year ago to 8.5%.
On the sales side, volume fell 6.8% year over year; however, most of that decrease was due to the divestiture of the company’s chicken operations in Brazil and Mexico, plus a hog business. Excluding those items, sales volume dropped 1.1%. Average prices dropped 9.2% year over year, with the biggest drop coming in pork prices (down 19.5%) and beef prices (down 14.4%).
In its outlook discussion, Tyson said it expects operating margin of more than 11% in its chicken segment while operating margin in beef at or above the low end of its normalized range of 1.5% to 3.0%. Operating margin in pork should be above the normalized range of 6.0% to 8.0%, and margin in the prepared food division is now forecast to be near the low end of the normalized range of 10% to 12%. Total annual sales are now forecast at approximately $37 billion, lower than the prior estimate of $41 billion due to lower prices for feed.
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