Tyson's Q4 earnings miss expectations, hurt by lower prices
- Tyson Foods' net income this quarter increased to $537 million from $394 million last year, according to the company's most recent earnings report. But the company's average prices for its products fell 4.1% during the quarter.
- The company's sales dropped 1.4% to $10 billion in the fourth quarter, missing analyst expectations that had predicted an average of $10.27 billion. That decline was largely impacted by a lower demand for chicken. Chicken sales were up 2.6% boosted by new acquisitions, but operating income decreased about 34% from the year before.
- Noel White, Tyson’s president and CEO, said in the release that the company saw "solid earnings" this fiscal year as a result of its differentiated portfolio and business model. "Our strategy is working, and it has allowed us to produce good returns this year and will enable continued long-term growth," he said.
Falling meat prices and lower demand for chicken hurt Tyson's sales and led it to miss Wall Street estimates. Trade issues have left the U.S. meat sector has grappling with larger supplies and lower prices — which have cut into profits. This quarter, Tyson's pork prices were down 15% and chicken prices dropped 7%.
Hormel Foods and Pilgrim's Pride also have been directly impacted by the volatile U.S. meat sector, since it is so heavily reliant on trade. This has reduced U.S. beef and pork exports to China and Mexico, increasing domestic supply.
But Tyson's trend of increasing net income is continuing. The company reported net income of $541 million — compared to $447 million the year before — bolstered by prepared foods and beef. Looking forward to fiscal year 2019, Tyson said that the company expects sales of $41 billion, with revenue growth predicted to come from chicken and prepared foods.
The quarter's report comes shortly after executive turnover. In September, Tyson CEO Tom Hayes stepped down for personal reasons after less than two years in the role. He was replaced by Noel White, who was at the time Tyson's beef, pork and international group president. Hayes had led the charge on a lot of M&A for the company before his departure and even had plans for more deals.
Under Hayes, Tyson's 2017 acquisition of AdvancePierre for $4.2 billion and purchase of Original Philly Holdings boosted the company's presence in prepared foods, but also put a dent into the company's operating income for costs related to accounting and acquisitions. But excluding the impact of the company's divestitures, sales for prepared foods in the fourth quarter increased by 0.7%.
More recently, Tyson acquired Keystone Foods — the maker of McDonald's chicken nuggets — for $2.16 billion in August. Although the company's earnings haven't yet reflected this acquisition, the move could help increase falling sales for the business since chicken nuggets are higher-profit products.
But now the company is shifting its strategy. White recently told The Wall Street Journal that he would be looking to rebuild the company's international presence and make acquisitions in other countries. This move could help limit the impact that changing U.S. meat prices make on the company's quarterly earnings.
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