Dive Brief:
- Tyson has boosted its profit forecast for the year to a range of $4.20 to $4.30 per share, over previous expectations of $3.85 to $3.95 per share, after reporting better-than-anticipated earnings and revenue for the second quarter Monday. The prior range would already have been a projected record for Tyson's annual earnings.
- Quarterly profit came in at $432 million, or $1.10 per share, from $310 million, or $0.75 per share, last year. This exceeded analysts' estimates of $0.95 per share.
- Revenue fell 8.1% to $9.17 billion, but that number also beat analysts' expectations.
Dive Insight:
Tyson's profit has received a boost from expanding cattle, hog, and poultry supplies, which has lowered costs for its prepared-foods business. The company grew its adjusted operating margin to 7.7%, a record for the period, from 5.5% in last year's second quarter.
This performance is a continuation of other recent earnings reports, including a 49% profit increase in the first quarter thanks in part to lower feed costs, though revenue saw an even steeper 15.4% decline that quarter.
At the top line, Tyson saw successful returns last quarter on pricing and marketing investments with increased volumes for products like Hillshire Farm smoked sausage and lunchmeat, Jimmy Dean breakfast sausage, and Ball Park hot dogs.
But innovation continues to be a focal point for the company going forward with a "three-year pipeline ... across all segments," Tyson president and CEO, Donnie Smith, said on the earnings call. This pipeline is integral to Tyson's shift from a meat-centric to a protein-centric company, as Smith outlined in a CAGNY presentation earlier this year.
Bottom line improvements are important, but cost-savers like low feed costs and expanding meat supplies won't last forever. Tyson's revenue continues to taper off, though this quarter less than expected. Finding new ways to align with consumer trends, such as in the protein and snacking spaces, can also improve the top line. That's a good way for Tyson to head off commodity volatility, which could impact the company's profitability in the future.
On the earnings news, Tyson shares increased by about 4% in pre-market trading.