I suppose it'd be easy to quip that Tyson Foods (NYSE: TSN ) has been butchered by Mr. Market during the past couple days. Therefore, discretion being the better part of valor, I won't go there.
Nevertheless, the Arkansas-based company -- the largest meat producer in the U.S. -- has watched its shares plummet after posting a 50% hike in quarterly earnings. Specifically, after the company announced on Monday that its fourth quarter earnings had grown to $48 million, or $0.13 a share, from $32 million and $0.09 in the year-earlier quarter, the company's share price slid by 10.3%, before dropping another 20%-plus today. Analysts had been looking for an EPS line with a nickel more in it than Tyson actually produced.
The company's higher earnings occurred in the face of a $91 million loss in their chicken business. The flap there related to a simple combination of rampaging feed costs and plunging product prices. In the most recent year, grain costs were up $600 million, while prices for skinless/boneless chicken breasts now fetch almost 20% less than they did just a year ago.
But there are other reasons that Mr. Market has been hard on the company. In addition to its having missed analysts' expectations, it appears that Tyson's future might not come close to living up to its past. While both the beef and pork segments were up in the latest quarter, CEO Richard Bond cautioned that a slowing global economy, swings in commodity markets, and a strong dollar in the face of increasing international sales could clobber results in the December quarter. Indeed, he specifically warned that the company could "lose some significant dollars" in the current quarter.
Tyson is not alone in its misery within the mixed food and agriculture sector. For instance, Smithfield Foods (NYSE: SFD ) reported a loss in August, while Pilgrim's Pride (NYSE: PPC ) is barely hanging on by its fingernails and Monday announced that it has hired a "restructuring officer." On the other side of the ledger, Monsanto (NYSE: MON ) has been strong, DuPont (NYSE: DD ) is being led by its agriculture unit, and Archer Daniels Midland's (NYSE: ADM ) latest quarter was a big one. It's noteworthy, however, that ADM operates a corn processing unit, which has benefited from the increasing importance of ethanol.
But back to the original consideration. The call on Tyson is simple: Enjoy the products; avoid the stock.
Tyson has been granted a pair of stars by Motley Fool CAPS players. Any beef with this ranking?
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