of Tyson (TSN 59.89 +2.14) traded higher this morning following
its earnings/guidance results and conference call, rising as high as $60.73/share.
Reminder: Tyson recently lowered fiscal year 2018 guidance. On July 30, the company lowered adjusted earnings guidance for fiscal year 2018 to approximate $5.70-6.00 per share from $6.55-6.70, sending shares 8% lower that day.
The primary drivers given for this fiscal 2018 guidance update were:
- Uncertainty in trade policies and increased tariffs negatively impacting domestic and export prices - primarily chicken and pork
- Increased volatility in the commodity markets resulting in a greater than expected increase in the domestic supply of proteins and lower sales prices
- Sluggish domestic chicken demand due to such pricing of competing proteins
- Pork margin compression driven by an imbalance in supply and demand
- A benefit from tax reform of about $0.77/share vs. a previous projection of $0.85/share
back to the current quarter...
This morning, the company reported fiscal third quarter earnings of $1.50/share, excluding non-recurring items, which came in ahead of expectations. On the top line, revenues rose 2.0% year/year to $10.05 bln, which fell short of expectations.
Also, the company reaffirmed its fiscal year 2018 earnings guidance at $5.70-6.00, excluding non-recurring items, which falls in-line with expectations.
Tyson expects fiscal 2018 sales to grow approximately 6% to between $40-$41 bln, which is attributed to incremental AdvancePierre sales of $1.1 bln, an increase in sales volume in its legacy businesses, and an improvement in mix. This estimate falls in-line with current expectations.
In fiscal 2019, the company expects sales to grow to $42 bln due to volume growth, mix, and approximately $150 mln from the impact of the Tecumseh Poultry, LLC and American Proteins, Inc. acquisitions net of divestitures, which comes in ahead of current expectations.
The majority of the sales growth is expected to occur in its Chicken and Beef segments, as well as expected growth in its Prepared Foods segment after excluding the impact of divestitures.
"We continued to grow our business in Q3, even with the headwinds we faced related to oversupply and pricing," said Tom Hayes, Tyson Foods president and CEO. "In this challenging environment, we delivered a solid quarter overall, growing earnings, operating income and margins."
Beef - Sales volume increased for the nine months and third quarter of fiscal 2018 due to improved availability of cattle supply, stronger demand for beef products, and increased exports. Average sales price decreased for the third quarter of fiscal 2018 due to increased availability of live cattle supply and lower livestock costs.
Pork - Sales volume decreased for the nine months and third quarter of fiscal 2018 as a result of balancing supply with customer demand during a period of margin compression. In the third quarter of fiscal 2018, average sales price decreased associated with lower livestock costs.
Chicken - Sales volume was up for the nine months of fiscal 2018, primarily due to incremental volume from business acquisitions. Sales volume decreased slightly for the third quarter of fiscal 2018 due to sluggish demand for certain chicken products, partially offset by incremental volume from business acquisitions. Average sales price increased for the nine months and third quarter of fiscal 2018 due to sales mix changes and price increases associated with cost inflation.
Prepared Foods - Sales volume increased for the nine months and third quarter of fiscal 2018, primarily due to incremental volume from business acquisitions. Average sales price increased for the nine months and third quarter from higher input costs of $80 mln for the nine months of fiscal 2018 and product mix that was positively impacted by business acquisitions.
For fiscal 2019, USDA indicates domestic protein production (beef, pork, chicken and turkey) should increase approximately 2-3% from fiscal 2018 levels. As previously announced, in the fourth quarter of fiscal 2017, the company’s Board of Directors approved a multi-year restructuring program, which is expected to contribute to the Company's overall strategy of financial fitness through increased operational effectiveness and overhead reduction.