NEW YORK—Tyson Foods Inc. reports earnings for the fiscal second quarter on Monday. The following is a summary of key developments and analyst opinion related to the period.
OVERVIEW: Tyson Foods, one of the largest meat producers in the world, has been faced with exceptionally high prices for the grain it needs to feed its animals. The company withdrew its fiscal year guidance in January, citing the far higher costs.
Both corn and soybeans have skyrocketed in the past year, due largely to the alternative fuel ethanol, which is made with corn. Once corn prices began to climb, farmers switched from soybeans to corn to take advantage of the higher prices. That lowered supplies of soybeans, which boosted those prices as well.
Tyson Chief Executive Dick Bond said in January he now expects the company to face more than $500 million in additional grain costs for fiscal 2008, well above the $300 million it anticipated in November.
Bond also said the company will have to raise its prices to cover the higher costs.
Also in January, Tyson announced it would cut 1,500 jobs and end some operations at a Kansas plant. The company said it made the move to address overcapacity at slaughterhouses and a shift of beef production to the western part of the state.
In February, the company added another 200 to 300 job cuts at the beef plant.
BY THE NUMBERS: Tyson Foods has not offered any guidance for the quarter. Analysts polled by Thomson Financial expect earnings of 1 cent per share on revenue of $6.69 billion.
ANALYST TAKE: Stephens Inc. analyst Farha Aslam said in a note to investors she expects poultry sales to rise 12 percent, largely driven by a 10 percent to 11 percent boost in prices.
But she said she anticipates beef and pork revenue to fall in the quarter due the closure of the beef plant in Kansas and lower pork prices.
WHATS AHEAD: Investors will mainly be watching to see how much grain costs cut into profits this year at the meat producer. Wall Street will also be looking to see if consumers balk at price increases.
The company may also see some benefit to its beef operations this year now that South Korea is again accepting certain cuts of beef exported by the U.S. The ban had been in effect since 2003.
STOCK PERFORMANCE: Shares rose 3.6 percent during the quarter and dropped nearly 15 percent in the past 52-weeks.
