Tyson Foods shares sink on worries over consumer demand, third quarter By Reuters

(Reuters) -Tyson Foods surpassed Wall Street expectations for second-quarter profit on Monday, as it begins to reap the benefits of shutting some U.S. chicken processing plants to reduce costs.

Shares of the Springdale, Arkansas-based company rose 2.4% in premarket trading.

The biggest U.S. meat company by sales has shuttered six chicken plants in four states since the start of last year, laid off corporate employees and announced plans to close a pork plant, in an attempt to rein in costs.

That helped it post adjusted earnings of 62 cents per share for the second quarter, compared with analysts’ average estimate of 39 cents, based on LSEG data.

Tyson boosted its estimate for total adjusted operating income to $1.4 billion to $1.8 billion for fiscal year 2024 from a previous forecast for $1 billion to $1.5 billion.

The increased outlook and higher-than-expected earnings were not overly surprising but could still support shares, Citi Research analyst Thomas Palmer said. Tyson also reported better-than-expected first-quarter earnings after closing processing plants.

The meatpacker has been attempting to turn around its chicken unit for years but struggled with excess supply in 2023. Adjusted operating margins rose to 3.9% in the latest quarter, compared to negative 3.7% a year earlier.

The company raised its adjusted operating income forecast for chicken to $700 million to $900 million from a previous outlook of $500 million to $700 million.

The unit’s sales were down 8.3% in the quarter, though, as prices fell 2.1%. Volumes dropped by 6.1% largely due to reduced U.S. production, Tyson said.

The meatpacker has been grappling with slowing demand from some price-conscious customers cutting back on expensive purchases amid still-high food prices and borrowing costs. Tyson’s total second-quarter net sales fell 0.5% to $13.07 billion, compared with estimates of $13.16 billion, and it projected sales will stay relatively flat in fiscal 2024.

Volumes in the beef segment, Tyson’s largest unit, grew for the first time in five quarters, logging a 2.8% increase as producers raised cattle to heavier weights that helped offset tight inventories.

In the quarter, the operating margin in Tyson’s beef business dropped by 0.7%.