Tyson Shares Plunge With Falling Meat Prices Hitting Profits

(Bloomberg) — Tyson Foods Inc. is getting hit by falling prices for beef and chicken that squeezed profits.

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The biggest US meat company said Monday that fiscal first-quarter earnings plunged 70% from a year ago and missed expectations. Shares tumbled 5.1% at 9:35 a.m. in New York trading.

“We faced some challenges in the first quarter,” Tyson Chief Executive Officer Donnie King said in a Monday statement. “Market dynamics and some operational inefficiencies impacted our profitability.”

The earnings miss comes as some consumers have been purchasing less meat to combat soaring food costs. Softer consumer demand is coming as costs for animal feed remain elevated, pressuring meat companies and farmers.

Chicken production has been rebounding, resulting in more supplies but smaller profit margins for vertically integrated companies such as Tyson, the top US producer. Meanwhile, tighter supplies of cattle and hogs were forcing meat companies to pay more for livestock. Operating margin in pork fell to a negative 1.4% for the first quarter, down from 10% in the first quarter of 2022.

In beef, profit margins fell to 3.5% for the quarter, from over 19% a year ago, hurt by “softer domestic demand and higher live cattle costs,” according to a slide presentation.

Chicken profits were 1.6% in the quarter, down from 3.6% in the same quarter of 2022. Tyson said US chicken-production should increase 3% this year. That could pressure prices, with boneless chicken breasts falling sharply since hitting a record in September.

Tyson recently named several new executives to help it navigate through the inflationary environment while John R. Tyson, great-grandson of the company’s founder and the chief financial officer, last month pleaded guilty to charges of trespassing and public intoxication following an incident where he was found asleep in a home that wasn’t his own.

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On an adjusted basis, earnings were 85 cents a share in the quarter, while on a GAAP basis they were 88 cents a share, both falling below the average analyst estimate of $1.33 a share compiled by Bloomberg.

Quarterly sales of $13.26 billion came in below pre-earnings estimates for $13.52 billion in a Bloomberg survey. Still, Tyson maintained its annual-sales outlook for record sales between $55 billion and $57 billion, with King saying the company expects to “improve our performance through the back half of fiscal 2023.”

The results were “weaker even than what we were braced for with our lowered numbers, and management lowered guidance considerably for the year,” said Ben Bienvenu, an analyst at Stephens Inc., in an emailed note. “The implied earnings power is quite a bit lower than we expected.”

(Updates shares and provides further margin details.)

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