Tyson's Q3 earnings surge 51% due to strong performance across all segments
Tyson Foods Inc. reported the following results for its third quarter. Sales for the quarter were $9.4 billion, down from last year’s $10.07 billion. However, operating income increased from $563 million to $767 million, and net income increased from $344 million to $485 million. To date, Tyson’s sales for the first nine months of the fiscal year are $27.725 billion, down from its results of $30.867 from a year ago. Operating income for the first three quarters has increased from $1.619 billion to $2.247 billion, and net income has increased from $965 million to $1.38 billion.
“We again demonstrated our ability to deliver higher, more stable earnings through our differentiated business model that emphasizes growth in prepared foods and value-added chicken,” Donnie Smith, chief executive officer of Tyson Foods, said. “We produced record third quarter earnings per share, operating income and return on sales. All operating segment results were in or above their normalized operating margin ranges, with the Chicken segment delivering a record 13.9% return on sales.
“At retail, our products are growing in sales volume, sales dollars and category share according to IRI, and Tyson is a leader in volume sales growth among the top 10 branded food companies.
“From the strong cash flows generated by our operations, we used $425 million to repurchase 6.6 million shares during the third quarter. We’re continuing our share repurchases and have bought back an additional $380 million worth of shares to date in the fiscal fourth quarter.
“We expect our high-level performance to continue and are raising full year fiscal 2016 earnings guidance. Following record earnings this year, we intend to build on our momentum to generate more growth in fiscal 2017.”
In its news release, Tyson provided commentary about the performance of each of its oerating segments:
- Chicken– “Sales volume decreased in the third quarter and nine months of fiscal 2016 as a result of optimizing our mix and our buy versus grow strategy. Average sales price increased slightly in the third quarter of fiscal 2016 as a result of sales mix changes. Average sales price decreased for the nine months of fiscal 2016 as feed ingredient costs declined, partially offset by mix changes. Operating income increased due to improved operational execution and lower feed ingredient costs. Feed costs decreased $50 million and $190 million during the third quarter and nine months of fiscal 2016, respectively.”
- Beef– “Sales volume increased in the third quarter of fiscal 2016 due to an increase in live cattle processed as a result of higher fed cattle supplies. Sales volume increased for the nine months of fiscal 2016 due to better demand for beef products despite a reduction in live cattle processing capacity due to the closure of our Denison, Iowa, facility in the fourth quarter of fiscal 2015. Average sales price decreased due to higher domestic availability of beef supplies, which drove down livestock costs. Operating income increased due to more favorable market conditions associated with an increase in cattle supply which resulted in lower fed cattle costs.”
- Pork– “Sales volume decreased in the third quarter of fiscal 2016, despite increased production, due to reduced inventory levels as well as the result of mix changes related to internally sourcing more hogs from our live operation. Sales volume decreased for the nine months of fiscal 2016 due to the divestiture of our Heinold Hog Markets business in the first quarter of fiscal 2015. Excluding the impact of the divestiture, our sales volume grew 1.5% driven by better demand for pork products. Average sales price increased in the third quarter of fiscal 2016 as demand for our pork products outpaced the slight increase in live hog supplies, which drove up average sales price. For the nine months of fiscal 2016, live hog supplies increased, which drove down livestock cost and average sales price. Operating income increased for the third quarter and nine months of fiscal 2016 due to better plant utilization associated with higher volumes.”
- Prepared Foods– “Sales volume increased in the third quarter of fiscal 2016 as a result of improved demand for our prepared foods products. Sales volume decreased for the nine months of fiscal 2016, despite increased sales volume in the third quarter, as a result of lower sales volume in the first six months of fiscal 2016 due to changes in sales mix as well as the carryover effect of the 2015 turkey avian influenza occurrence into the first half of fiscal 2016. Average sales price decreased primarily due to a decline in input costs, partially offset by a change in product mix. Operating income remained strong in the third quarter of fiscal 2016 as a result of strong demand for our products partially offset with higher promotional spending. Operating income increased due to mix changes as well as lower input costs of approximately $215 million for the nine months of fiscal 2016. Additionally, Prepared Foods operating income was positively impacted by $116 million in synergies, of which $37 million was incremental synergies in the third quarter of fiscal 2016 above the $79 million of synergies realized in the third quarter of fiscal 2015. For the nine months of fiscal 2016, Prepared Foods was positively impacted by $322 million in synergies, of which $118 million was incremental synergies in fiscal 2016 above the $204 million of synergies realized in the nine months of fiscal 2015. The positive impact of these synergies to operating income was partially offset with heavy investments in innovation, new product launches and supporting the growth of our brands.”
In fiscal 2017, Tyson said it expects domestic protein production (chicken, beef, pork and turkey) to increase approximately 2-3% from fiscal 2016 levels and moderate export growth.
“As we continue with the integration of Hillshire Brands, we expect to realize synergies of approximately $700 million in fiscal 2017 from the acquisition as well as our profit improvement plan for our legacy Prepared Foods business. The majority of these benefits will be realized in our Prepared Foods segment,” the company added.
Source: Tyson Foods Inc.