Shares of Tyson Foods sagged Monday after the meat producing giant reported third-quarter earnings that met some analysts' estimates but also detailed reduced sales volume in its pork, chicken and prepared foods segments.
Springdale-based Tyson reported earnings of $750 million, or $2.07 per share, for the period ended July 2, up slightly from $749 million, or $2.05 share, for the year-ago period.
In a conference call with analysts Monday morning, Chief Executive Officer Donnie King called the quarter's results solid but said the meat giant is operating in a complex and dynamic environment. He said demand is steady but the company is facing higher labor and freight costs and its customers are feeling pressure from inflation. Internationally, Tyson's results have been affected by a strong dollar and shipping delays along with covid shutdowns in China.
"We remain confident our actions will improve our long-term volume performance. However, our total volume was down both for the quarter and year to date," King said during the call. "We are focused on overcoming the supply chain challenges, running our plants full, and reducing our costs. Chicken volume is up year to date, driven by demand and operational improvements, but down for the quarter."
Tyson's adjusted net income was $1.94 a share for the third quarter, compared with $2.70 for the same period last year. A Zacks Consensus Estimate puts Tyson's earnings for the quarter at $1.91 per share.
Revenue stood at $13.49 billion, up 8% from $12.47 billion in 2021. Zacks' estimate on revenue was $13.3 billion.
Tyson released its earnings before markets opened Monday.
Shares fell $7.35, or 8%, to close Monday at $80.10 on the New York Stock Exchange. Shares have traded as low as $74 and as high as $100.72 over the past year.
In a research brief, analyst Ben Bienvenu of Stephens Inc. said the company missed his adjusted earnings per share estimate of $1.97.
"Management maintained its margin guidance for beef/prepared foods/chicken, and lowered their guidance for pork. Results in the quarter a little light of what we were hoping to see, but again trended in the right direction in the recovery of chicken segment profitability," Bienvenu said.
Tyson's beef segment saw third-quarter sales of $4.96 billion, up slightly from $4.95 billion from last year. Sales volume was up 1.3%, with average price down 1.2% compared with a year ago. The company said higher sales were due to strong global demand but offset by labor costs and supply chain issues. Average sales prices were down for the quarter because of reduced demand for expensive cuts of beef when compared with high demand in the year-ago quarter. For the period, operating income was $553 million, down from $1.12 billion, with operating margins at 10.7%, down from 22.6% a year earlier.
"We are still experiencing drought, and I'd say the drought impact is still impacting over 40% of the regions where we grow cattle out in this country," Shane Miller, group president for fresh meat, said during the question-and-answer section of the call with analysts. "So the drought is real, and it's still having an impact today. I think getting precise and specific on the timing of when it's going to flip is awfully difficult to do because we're dealing with mother nature right now."
Sales of pork were $1.62 billion for the quarter, down from $1.71 billion a year ago. Sales volume was down 1.7% compared to last year, and average price was down 3.9% for the period. The company said sales volume decreased during the quarter due to reduced worldwide demand while average sales price was down due to reduced export and retail demand. Operating income for the pork segment stood at $25 million, down from $67 million for the third quarter of 2021, with operating margins of 1.5%, compared with 3.9% a year ago.
Chicken sales were $4.37 billion for the third quarter, up from $3.48 billion, with sales volume dropping 2.1% compared with last year and average price up 20.1%. In the chicken segment, average sales prices were up for the quarter due to a pricing initiative but tempered somewhat by increased supply chain and labor costs. For the period, operating income was $277 million, compared with a loss of $279 million last year. The operating margin of 6.3% for the quarter compared with a loss of 8% a year ago.
"Chicken remains a key focus for our long-term success, and we are executing against our road map to restore top quartile performance for this segment," King said during the call Monday. "This quarter, we surpassed a 6% adjusted operating margin. We expect to reach 40 million head per week by the end of this fiscal year, and to continue to grow after that, enabling us to maximize our fixed cost leverage and grow our value-added business."
Sales in the prepared food segment were $2.45 billion, up from $2.32 billion last year. Sales volume was down 8.5%, with average price up 13.8%. The company said sales volume was pegged to a reduction because of a fire at a production facility in the fourth quarter and a reduction in outside meat purchases. Operating income for the quarter was $186 million, up from $150 million a year ago, with an operating margin of 7.6%, compared to 6.5% last year.
The international/other segment booked sales of $602 million, up from $488 million a year ago, with sales volume up 21.9% and average price up 1.5%. Operating income was $12 million, compared with $4 million a year ago.
Tyson said its fiscal 2022 outlook has revenue of between $52 and $54 billion. The company expects lower results for fiscal 2022 in its international/other segment because of supply chain disruptions and the impacts of covid-19.