Earnings Preview: Tyson Foods Inc.

AP News
Posted: Nov 20, 2009 2:15 PM

Tyson Foods Inc., the world's largest meat producer, is scheduled to report results for its fiscal fourth quarter on Monday before the market opens. The following is a summary of key developments and analyst opinion related to the period.

OVERVIEW: The meat industry continues to improve as prices for key ingredients like corn fall from record highs they reached in summer 2008 and as companies like Tyson limit their production to help keep prices up.

So it's no surprise industry leader Tyson Foods, which is based in Springdale, Ark., also is seeing improvement. The company's hurting chicken segment turned profitable in the third quarter and analysts expect it to report it stayed profitable in the fourth, which ended in September.

The chicken industry, in which Tyson does a large portion of its business, had been particularly hard hit because much of it is consumed in restaurants, which were also seeing a downturn that further weakened pricing. But producers have been cutting their output.

Tyson announced Thursday that its board named a new CEO to replace interim head Leland Tollett. Tollett, who ran the company from 1991 to 1998, was tapped in January to lead the company through the downturn.

Donnie Smith, Tyson's senior group vice president of poultry and prepared foods, will take over for Tollett immediately. Tyson also promoted Jim Lochner, senior group vice president of fresh meats, to chief operating officer.

BY THE NUMBERS: Analysts polled by Thomson Reuters expect the company to earn 26 cents a share, excluding one-time items, on revenue of $6.89 billion for the quarter. Last year in the same period, the company earned 13 cents a share on revenue of $7.2 billion.

ANALYST TAKE: KeyBanc Capital Markets analyst Akshay Jagdale said Smith and Lochner were leading candidates to take over the company's top slots. He told clients in a note that he expected the chicken segment was profitable in the fourth quarter and that the company's appointment of new leadership is directly related.

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"This announcement removes a source of uncertainty, in our view, but we believe what is most important for the stock is how Tyson's chicken segment performs over the next six to 12 months," he said.

WHAT'S AHEAD: The company is benefiting from the drop in commodity costs but it's not clear how long those costs will stay down. The lingering recession could also mean consumers continue to shy away from restaurants, which will keep demand and prices down.

STOCK PERFORMANCE: Tyson's shares were unchanged during the quarter to finish at $12.63. Shares closed Thursday at $13.07, toward the high end of their 52-week range from $4.40 to $14.25.