Tyson Foods Inc. lowered its 2019 fiscal earnings guidance on Tuesday as it deals with challenges ranging from commodity market volatility to a recent beef plant fire in Kansas.
Tyson is experiencing "short-term challenges that are negatively affecting fourth-quarter earnings," the Springdale packer told shareholders in a regulatory filing issued after the stock market closed.
As a result, the company is lowering its 2019 earnings guidance to fall between $5.30 and $5.70 per share, and monitoring potentially adverse market movements.
Although the company is expecting to fall short this year, Noel White, Tyson's president and chief executive officer, issued a statement, saying "our outlook for fiscal 2020 remains positive as we believe some of the challenges we're experiencing are not expected to repeat, and we're expecting more favorable market conditions as well."
In the filing, Tyson listed challenges this quarter including commodity market volatility, implementation of enhanced food-safety initiatives, a beef processing plant fire and slower-than-expected operational improvements in its chicken business.
With this in mind, White said Tyson's portfolio is currently generating strong sales volumes, while its case-ready beef and pork businesses continue to grow. The company's international business is also doing well as it continues to integrate Keystone Foods and some newly acquired Thai and European chicken plants, he said in a statement Tuesday.
In the meantime, Tyson is adjusting its U.S. beef business after a fire indefinitely closed one of its major processing plants in Kansas, which could slaughter about 6,000 head per day. The impact of the fire sent U.S. commodity and retail beef prices haywire in the days after, raising concerns among traders of unfair beef pricing practices. Last week, Agriculture Secretary Sonny Perdue said he has directed the agency's Packers and Stockyards Division to begin an investigation into the matter and if "any unfair practices are detected, we will take quick enforcement action."
"USDA remains in close communication with plant management and other stakeholders to understand the fire's impact to industry," Perdue said in a news release.
Beforehand, Tyson expected annual earnings to be between $5.75 to $6.10 per share. They have been reduced about 43 cents at the midpoint, and are "well below our estimates of $5.84" per share, Stephens Inc. analyst Ben Bienvenu said in a research brief sent after Tyson's update.
He said this news likely will weigh on Tyson's stock price today, but given the current backdrop of African swine fever inflation and the fact that most of these issues are "transitory in nature," Stephens remains positive about Tyson's stock going into fiscal 2020.
Bienvenu said Stephens will look for further earnings details from Tyson during its presentation at the Barclays Global Consumer Staples Conference in Boston today.
Tyson said the presentation will be at 7:15 a.m. and webcast live on its investor relations website.
Tyson shares rose 25 cents to close Tuesday at $93.29 on the New York Stock Exchange. Shares fell more than 5% in after-hours trading.
Business on 09/04/2019