Tyson Foods Inc. lowered its fiscal 2018 earnings outlook on Monday, a week before the company is scheduled to deliver its third-quarter results.
The note from the Springdale-based company sent its stock price down 7.6 percent.
Tyson, the nation's largest meat producer, lowered its adjusted fiscal 2018 earnings to $5.70 to $6 per share, lower than the estimated $6.55 to $6.70 per share that was forecast earlier this year. The company said foreign and domestic trade and market uncertainties are edging into the earnings of U.S. food companies.
In an 8-K filing submitted Monday morning to the U.S Securities and Exchange Commission, Tyson attached a news release with the above information. Traders reacted negatively to the news. Tyson shares fell $4.83 Monday to close at $58.72. They have traded as high as $84.65 over the past 52 weeks and as low as $58.33.
In the announcement, Tyson cited increased tariffs, which have rattled the commodity markets in recent months, as a key catalyst for an industrywide meat glut that has hurt Tyson's domestic and export prices of chicken and pork.
"Our forecasted earnings range reflects the current market volatility in meat prices," Tom Hayes, Tyson's president and chief executive officer, said in the release. "The combination of changing global trade policies here and abroad, and the uncertainty of any resolution, have created a challenging market environment of increased volatility, lower prices and oversupply of protein."
"We will continue to watch these conditions carefully," he said.
In the guidance update, Tyson also cited sluggish domestic chicken demand, pork margin compression and a lower-than-expected benefit from the federal corporate income tax overhaul that took effect in December.
While a "trimming" of Tyson's earnings guidance isn't shocking, Ken Shea, a Bloomberg Intelligence analyst, said the company "hasn't had one of these in a while."
Shea, who covers a range of food and beverage companies, said most are dealing with the same things: a tough pricing environment, a slow market, higher freight costs and the "double whammy" effect of depressed markets that stem from the cyclical nature of food businesses and the current international trade backdrop.
Of the 34 food companies Shea follows, he said Tyson's shares performed the worst on Monday's stock market, followed by Hormel and Pilgrim's Pride. Hormel shares fell 92 cents, or 2.5 percent, to close at $35.73 and Pilgrim's Pride fell 27 cents, or 1.5 percent, to $17.95.
New U.S. tariffs on aluminum and steel imports announced earlier this year caused China to retaliate with tariffs on a litany of U.S. goods, including pork, beef, and soybeans -- a key ration in the meat industry. The trade battle has led to a 20 percent drop in soybean prices.
Tyson's Hayes said he is confident the company's beef and prepared foods businesses, paired with its broad portfolio of proteins and brands, "has given us some level of insulation from challenging market conditions."
"We are working to mitigate these pressures, but our fourth quarter is off to a slower than expected start driven primarily by market related factors," Hayes said in the release. "We expect the supply-demand imbalance to equilibrate, and we remain confident in our ability to grow our company and create long-term shareholder value."
Tyson will release its third quarter earnings report next Monday.
Bloomberg pegged Tyson's fiscal 2018 earnings at $6.46 per share on Monday.
"I would guess that's going to come down," when analysts file updated reports, Shea said.
Business on 07/31/2018