Tyson Foods Inc, the largest U.S. meat processor, on Monday forecast 2015 profit that could top Wall Street's view due to record beef prices, lower feed costs and its recent purchase of sausage seller Hillshire Brands.
Shares of Tyson, which also reported better-than-expected profit for the latest quarter, were up more than 5 percent at midday.
Tight supplies sent average beef prices up 21.5 percent in the latest quarter, while pork was up 16.5 percent,Tyson said.
Trade-down to lower-priced chicken products should continue, and the recent drop in prices at the gas pump could free up more money for restaurant visits, Chief Executive Officer Donnie Smith told analysts on a conference call.
The company, which derives almost 15 percent of sales from Wal-Mart Stores Inc, forecast adjusted profit of $3.30 to $3.40 per share for the fiscal year ending September 2015. Analysts, on average, expected a profit of $3.33 per share.
Tyson also forecast 2015 revenue of $42 billion, including an expected $4 billion in revenue from the Hillshire acquisition.
Fed cattle supplies are expected to shrink about 4 percent in 2015. Those supplies are forecast to be flat to down about 1 percent in 2016, Smith said.
Hog supplies, hard hit by the deadly Porcine Epidemic Diarrhea virus (PEDv) in 2014, are expected to expand 2 to 3 percent this year, Smith said.
"It appears there will be fewer instances of PEDv," Smith said.
Smith forecast an increase of roughly 3 percent in chicken supplies this fiscal year. Chicken sales were up in the latest quarter, but prices fell 4 percent as feed costs declined.
Demand in China, where Tyson's customers include Yum Brands Inc's KFC restaurant chain, remains weak after a meat scandal involving a major supplier to McDonald's Corp.
"China remains in somewhat of a holding pattern," Smith said.
Tyson's net income nearly halved to $137 million, or 35 cents per share, for the fiscal fourth quarter ended Sept. 27. Still, earnings excluding acquisition charges and other items came in at 87 cents per share, besting analysts' average estimate of 76 cents, according to Thomson Reuters I/B/E/S.
Tyson shares were up 5.3 percent at $42.81 at midday.
(Reporting by Ramkumar Iyer in Bangalore and Lisa Baertlein in Los Angeles; editing by Joyjeet Das and Matthew Lewis)