Source:  Tom Johnston, MEATINGPLACE.COM, 5/10/10

Tyson Foods Inc. said Monday its beef and pork units will make more for every dollar of product they sell as officials offered positive guidance after a profitable second fiscal quarter.

The Springdale, Ark.-based protein giant said it is boosting normalized margin estimates for beef to a range of 2.5 percent to 4.5 percent from a range of 1.5 percent to 3 percent and pork to a range of 4 percent to 6 percent from a range of 3 percent to 5 percent.

"These are meaningful changes," JP Morgan analyst Ken Goldman wrote in a note to investors. "Take beef, for example, where the midpoint of guidance rose by 1.25 [percent]. Assuming $11 [billion] in revenue per year, this implies an extra $138 [million] in normalized [earnings before interest, taxes, depreciation and amortization]."

For the quarter ended April 3, Tyson said net earnings were $159 million, or 42 cents per diluted share, compared with a loss of $119 million, or 32 cents per share, during the same period last year. Sales rose to $6.9 billion from $6.3 billion, thanks primarily to higher average prices in all segments.

The performance beat Wall Street's expectations of 34 cents per share on $5.54 billion, according to Thomson Reuters.

Tyson's stock was up 5 cents to $18.67 as of about noon on the New York Stock Exchange at the same time the Dow Jones Industrial average was up almost 434 points.

Beef and pork

Tyson said improved internal performance and better market conditions, including tighter supplies, increased demand and reduced imports, helped the company post profits in all of its core businesses.

Beef income was $126 million (4.6 operating margin) in the quarter, compared with $28 million (1.2 percent operating margin) in the year-ago period, with the company crediting production efficiencies and maximizing revenues related to live cattle markets. Jim Lochner, Tyson's chief operating officer, told analysts in a conference call the success could be largely attributed to the closure of noncompetitive regional plants, a major part of what historically limited beef margins. Sales volume rose 6.3 percent while average sales price rose 0.8 percent.

Pork income was $69 million (7.4 operating margin), compared with $29 million (3.4 percent operating margin) year on year, attributed to plant operating efficiency and maximized sales relative to live costs. Sales volume decreased 2.7 percent while average sales price rose 4.1 percent.

Chicken

Meanwhile, lower grain costs and continued operational efficiencies led to chicken income of $114 million (4.6 percent operating margin), compared with a loss of $46 million (-1.9 percent operating margin) in the second quarter in 2009. Sales volume was up 0.4 percent while average sales price increased 6.6 percent.

Tyson CEO Donnie Smith said the company still has more work to do in terms of implementing operational improvements before he'd be comfortable raising normalized margin estimates for chicken.