Tyson Foods reported better-than-expected revenue and profit for the third quarter on Monday, driven by a resurgence in meat sales and reduced feed costs due to lower grain prices. The company’s shares rose by 2.8% despite a weaker broader stock market.
The increase in profits from the chicken business follows years of struggles for Tyson, the largest U.S. meatpacker by sales, to revitalize the unit, leading to plant closures and layoffs. In 2023, Tyson faced challenges with excess supplies after misjudging demand.
Tight cattle supplies in the U.S. are putting pressure on Tyson’s beef business, its largest segment. However, a brighter outlook for chicken has led the company to narrow its total adjusted operating income forecast for fiscal year 2024 to between $1.6 billion and $1.8 billion, up from the previous range of $1.4 billion to $1.8 billion. Tyson is working to better align chicken supplies with customer demand, having previously reported a reduction in production to match supply with demand.
Wes Morris, president of Tyson’s poultry business, mentioned to analysts that the company has executed its plans more quickly than anticipated. Tyson’s total net sales increased by 1.6% to $13.35 billion in the quarter, surpassing analysts’ estimates of $13.24 billion, according to LSEG data. Adjusted earnings of 87 cents per share exceeded expectations of 65 cents.
JP Morgan noted that the quarter was solid, with the chicken segment performing particularly well against expectations. The chicken unit’s adjusted operating income rose to $307 million from a loss of $63 million a year ago, as Tyson improved its success rate in keeping birds alive until slaughter. With grain prices at near four-year lows, animal feed costs decreased by $305 million. Tyson raised its estimate for the unit’s adjusted annual income for the third consecutive quarter. CEO Donnie King highlighted that operational improvements have allowed the company to benefit from favorable market conditions.
