Tyson Foods Inc. widely missed Wall Street estimates for quarterly profit on Monday and cut its expectations for operating margins this year in the face of falling beef prices and easing demand for pork.
The results sent the U.S. meatpacker’s shares down more than 5 percent in premarket trade.
A year earlier Tyson’s profits had climbed due to soaring meat prices and strong demand.
Facing high inflation, some consumers have since reduced their spending and switched to cheaper types of meat, such as buying hamburger instead of steaks.
Chief Executive Donnie King said challenging “market dynamics and some operational inefficiencies” hurt profitability.
Sales rose 2.5 percent to $13.26 billion in the three months ended Dec. 31, missing analysts’ average estimate of $13.52 billion, according to IBES data from Refinitiv. Adjusted earnings of 85 cents per share were much lower than expectations of $1.34 per share.
Results were “bad all around,” Credit Suisse said in a note.
In Tyson’s beef business, its largest segment, operating margins shrank to 3.5 percent from 19.1 percent a year earlier. Average beef prices fell by 8.5 percent, compared to a surge of nearly 32 percent a year earlier, according to the company.
Tyson’s average pork prices rose 1.4 percent in the latest quarter, while sales volumes declined 7.4 percent. The company cut its outlook for adjusted operating margins in pork to 0 percent to 2 percent for fiscal 2023 from a previous forecast of 2 percent to 4 percent.
Tyson lowered its outlook for operating margins in its chicken business to 2 percent to 4 percent from 6 percent to 8 percent, though prices rose 7.1 percent in the latest quarter.
JP Morgan said it was “surprised by the magnitude of both the earnings miss and guidance reductions.”
Wall Street analysts have also said chicken prices are now trending lower, with brokerage Piper Sandler noting prices of boneless, skinless chicken breast down by about 45 percent in the quarter.
