Tyson Foods (TSN) is sizzling, or at least heating up. Demand for what the company calls proteins — chicken, beef, pork, and turkey — is picking up in the United States and in export markets. In the second quarter of 2011, Tyson Foods sales hit $8 billion, up 16 percent from last year. Net income came to $156 million and earnings per share came to 42 cents, both unchanged from last year.
"Overall, it was a solid quarter, and I'm pleased with the results," said President and Chief Operating Officer Donnie Smith. "We produced record sales for the second quarter on substantially higher sales prices in addition to increased volume. All segments except Chicken were within or above their normalized operating margin ranges.”
While the chicken business was below its range, it did turn a profit and will continue to do so for the rest of the year. Beef and pork products will do well also, he said.
"Most exciting to me is that we still have a significant amount of opportunity to increase profitability throughout Tyson Foods. We will continue to face challenging and volatile market conditions in fiscal 2011, but we maintain our belief that earnings should be comparable to 2010 due to our on-going operational improvements and focus on execution," Smith adds.
In fiscal 2011, domestic chicken, beef, pork and turkey production should increase in 2011, especially abroad, the company says. "We are happy with the improvement in demand we've seen following a cold, wet April," Smith says.
Protein supplies will decline amid rising demand, which puts upward pressure on their prices in a way that will benefit Tyson. "Exports, along with production efficiencies and value-added programs, are driving our earnings," White says.
Analysts are taking note. KeyBanc Capital Markets, BB&T Capital Markets and Deutsche Bank have all upgraded their outlooks for the company to buy from hold.
Ratings agencies Standard & Poor’s and Fitch Ratings have upgraded their debt ratings for Tyson Foods, both returning the company to investment grade.
“Although U.S. meat marketer and producer Tyson Foods' strengthened operating performance may decline in the coming quarters due to higher commodity costs, we believe its improved credit measures will continue to support a higher rating,” S&P reports.
“The outlook is stable, reflecting our belief that the company will continue to maintain, on average, credit measures that support the ratings.”
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