Tyson Foods Inc. raised its full-year earnings forecast as strong US chicken demand and cheap feed costs help it withstand losses it its beef business.
Operating earnings, excluding some items, are expected to range from $2.1 billion to $2.3 billion in fiscal year 2025, an increase of $100 million at the midpoint from the prior guidance range, Tyson said in a statement. The increase was largely driven by a more optimistic view of its chicken business.
A severe shortage of cattle has sent prices for slaughter-weight animals surging to record levels, eroding profits for beef processors as they struggle to pass higher costs on to consumers.
Tyson managed to cushion the impact thanks to stronger demand for chicken as meat eaters seek cheaper alternatives. Its poultry operations have also benefited from ample grain supplies, which have kept a lid on feed costs.
The shares climbed 3.1% as of 9:58 a.m. in New York, making Tyson the day’s strongest performer in the S&P 500 Consumer Staples Index. The advance narrowed the stock’s year-to-date loss to 5.7%.
“Chicken continues to provide support to the business as the company continues to face beef headwinds,” Pooran Sharma, an an analyst at Stephens Inc., wrote in a note to clients.
Tyson, which is widely known for its Jimmy Dean sausages and Hillshire Farm hams, said adjusted earnings rose 4.6% from a year earlier to 91 cents a share in the three months ended June. That beat even the highest of analyst estimates compiled by Bloomberg.
The company’s chicken unit posted the highest adjusted operating profit since 2016, also exceeding analyst estimates, according to data compiled by Bloomberg. The operation benefited from an increase in both volumes and prices.
Meanwhile, the company lost $151 million on beef when some excluding items. It was the seventh straight quarter of losses for the operation, the company’s largest. Tyson recorded a goodwill impairment charge of $343 million in the business.
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