Tyson beats estimates despite weak beef demand

Tyson Foods Inc posted higher-than-expected second-quarter profit, as price increases helped offset weak beef sales, and expressed optimism about the full year.

The nation's largest meat processor said it expects to gain momentum in the third and fourth quarters.

"We still think we have the potential for earnings per share of $2 for the year if we execute as planned," Tyson Chief Executive Officer Donnie Smith said in a statement on Monday.

Tyson, which sells beef, chicken, pork and prepared foods, had earlier forecast a profit for fiscal 2012 of more than $2 per share, but tempered its view in February, saying profit would likely come in "around the $2 mark".

"The fact that $2 is still in the picture and was highlighted by management in its written comments probably will be seen as a positive," said JP Morgan analyst Ken Goldman.

Goldman added that Tyson's beef segment, which posted an operating loss of only 0.1 percent, was much better than many investors feared.

The U.S. beef industry suffered a blow earlier this year after a wave of unflattering press reports about a ground beef filler critics called "pink slime."

Tyson said that weakened demand for beef products made it difficult to pass on higher commodity costs.

Then last month, the United States reported its first case of mad cow disease in six years, raising alarms that demand would drop off. But major export markets for U.S. beef, from Canada to Japan, stayed open.

The company said it expects industrywide domestic production of chicken, beef, pork and turkey to decrease about 4 percent this year, which should continue to support better pricing.

In the second quarter, ended on March 31, overall volume fell 4.3 percent, pulled down by a 10.7 percent drop in the beef segment.

Tyson's net income was $166 million, or 44 cents per share, in the quarter, up from $159 million, or 42 cents per share, a year earlier.

Analysts on average were expecting 39 cents per share, according to Thomson Reuters I/B/E/S.

Sales rose to $8.27 billion from $8.0 billion, missing analysts' estimate of $8.49 billion.

 

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