Tyson Foods Optimistic Despite Shares Drop
By Amanda Brodhagen, Farms.com
Tyson Foods Inc. one of the world’s largest processors of chicken, beef and pork had their company shares fall 4.5 per cent to $14.7 in the second quarter in the New York Stock Exchange. The weaker than expected sales earnings are related to the beef and pork segments of the business with chicken sales remaining profitable.
The U.S. drought is expected to continue to exacerbate the sales drop, with higher feed costs causing input costs of grain to skyrocket hurting projected earnings over the next year.
"While we ultimately expect to pass along rising input costs, these costs, coupled with continued soft demand, are likely to pressure earnings in 2013," says Donnie Smith, Chief Executive of Tyson Foods Inc.
While the undesirable market conditions are putting a toll on Tyson’s beef and pork business, their chicken sales are not expected to feel the dent, despite higher feed costs.
With beef and pork experiencing weaker than expected sales growth, the company is optimistic that beef will be profitable but their profit margins will fall below the company’s typical range. The uncertainty rests with the consumer and their interpretations of the correlations between the U.S. drought causing meat prices to rise. If consumers are sympathetic to this correlation, the demand should remain steady. Looking at grocery store sales for meat products, beef and pork sales were down while chicken sales remained steady. The global giant continues to stay on top of consumer trends seeing more people buying less expensive cuts of meats rather than stopping consumption of pork, beef and chicken products all together.
Tyson has readjusted their projections expecting sales of $33 billon which is $1 billon dollars less compared to their first quarter projections.