Tyson Foods Inc shares tumbled almost 16% on Monday after the nation's biggest meat processor forecast lower-than-expected 2017 profit and said Chief Executive Donnie Smith would step down at the end of the year.
The company also reported disappointing quarterly results due to increased investment spending and shortfalls in its chicken and prepared food businesses, and shares fell 15.4% to $56.97.
The seller of Jimmy Dean sausage and Ball Park hot dogs expects profit of $4.70 to $4.85 a share in the year ending September 2017, below analysts' average estimate of $4.98, as it boosts capital spending to $1 billion from $700 million in 2016 to improve worker safety, animal welfare, food safety and its supply chain.
Company president, Tom Hayes, will succeed Smith, 56, who has been at the helm since November 2009. Hayes, 51, was previously the chief supply chain officer for Hillshire Brands Co, which Tyson bought in 2014.
Tyson, which canceled its regular earnings call with journalists, has been looking to shore up profits by selling more "value-added" items such as pre-seasoned products and heat-and-serve meals, which command higher margins than basic meats.
"The board's decision to name Tom (Hayes) CEO at this time was based on both his track record and how his skills align with the company's strategic direction and continuing evolution," said John Tyson, chairman of the board and the founder's grandson.
Smith, who will advise the company for three years after stepping down on Dec. 31, reiterated that sentiment when analysts questioned him on the timing of the CEO change on a conference call.
Tyson's sales fell 12.8% to $9.16 billion in the fourth quarter ended Oct. 1, for a fourth straight quarter of declines, due to sharply lower beef prices and a switch to more value-added items in its chicken business.
Analysts, on average, had expected revenue of $9.38 billion, according to Thomson Reuters I/B/E/S.
Net income attributable to Tyson surged 51.6% to $391 million, or $1.03 per share, helped by lower overall feed and livestock costs. During the quarter, however, Tyson's chicken business was hit hard by a spike in soybean meal costs.
Excluding items, the company earned $0.96 cents a share, missing analysts' average estimate of $1.17 per share.
As of Friday's closing share price of $67.36, Tyson's stock had surged 26.3% this year.
Tyson CEO Stepping Down