Tyson Foods on Monday reported better-than-expected quarterly earnings, reflecting lower livestock feed costs after four straight years of bumper harvests.
Tyson’s feed costs fell $65 million and $80 million for the fourth quarter and fiscal 2017, respectively, and it is expecting the trend to continue in fiscal 2018, benefiting in particular its poultry business. Grain accounts for more than half the cost of growing a chicken.
“Fiscal 2018 is off to a great start, and we’re currently expecting adjusted earnings growth of 7-10 percent to $5.70-5.85 per share,” Tyson Foods CEO Tom Hayes said in a news release.
For the fourth quarter, the company earned an adjusted $1.43 cents per share on revenue of $10.15 billion, up 10.8% from a year ago. Analysts had expected earnings of $1.38 per share and revenue of $9.89 billion.
On news of the earnings, Tyson shares rose 2% to $75.59 in trading Monday.
“The fourth quarter was a strong finish to another record year,” Hayes said. “We delivered well over our goals of at least 4 percent operating income growth, EPS growth in the high single digits and 3 percent volume growth in value-added products, and expect to meet or exceed these goals again in fiscal 2018.”
“Our beef and pork segments delivered outstanding returns for the quarter and for the year, again generating significant cash to fuel investments in our chicken and prepared foods segments,” he added.
The chicken segment’s adjusted operating income rose 46.3% to $322 million in the fourth quarter and operating margin improved to 10.6% from 7.8%. Sales in Tyson’s beef business, its largest by revenue, rose 9.5%, while operating income more than doubled.
“Based on current futures prices, we expect similar feed costs in fiscal 2018 compared to fiscal 2017,” Tyson said. “For fiscal 2018, we believe our chicken segment sales will grow with around 3% volume growth, and adjusted operating margins should improve to around 11%.”
The company forecast total sales of $41 billion for the year ending September 2018, ahead of analysts’ average expectation of $40.36 billion.