UPDATE 3-Tyson profit tops expectations, chicken improves

* Q1 EPS 42 cts vs Street view 18 cts

* Rev $6.63 bln vs yr earlier $6.52 bln

* FY ’10 chicken profit margin seen at 5 pct-7 pct

* Shares up almost 6 pct, highest since September 2008
(Updates to focus on chicken business, adds company and
analyst comments, byline)

By Bob Burgdorfer

CHICAGO, Feb 5 (BestGrowthStock) – U.S. meat producer Tyson Foods
Inc (TSN.N: ) reported a higher-than-expected first-quarter
profit and predicted even better profit margins for its chicken

Its shares rose nearly 6 percent to a 15-month high.

Tyson’s beef and pork profits improved from a year ago,
helped by cost-cutting efforts and stronger exports. But
investors were watching closely for signs of a turnaround in
its chicken operations, which have suffered from weak consumer
demand and rising feed costs.

The company said its chicken business, the nation’s
largest, earned $78 million on an operating basis, on a 3.2
percent profit margin, and that those margins should improve.

“First thing we have to do is more consistently generate
operating margins in that 5 to 7 range, which we should do this
year,” Chief Executive Donnie Smith told analysts.

“Consumers are still worried about the economy and
unemployment although our research indicates they’re starting
to feel a little bit better about their economic situation and
aren’t hardly as concerned about limiting their restaurants
visits,” Smith said during the call.

J.P. Morgan analyst Ken Goldman noted that Tyson hadn’t
posted a first-quarter margin that high in its chicken business
since early 2007.

The Springdale, Arkansas-based company reported
first-quarter earnings of $160 million, or 42 cents per share,
compared with a year-earlier loss of $102 million, or 27 cents
per share.

Wall Street analysts, on average, expected a profit of 18
cents, according Thomson Reuters I/B/E/S.

Revenue for the quarter, ended Jan. 2, increased to $6.64
billion from $6.52 billion a year earlier.

In its conference call with analysts, the company estimated
full-year revenue at $27.5 billion to $28 billion, up from its
previous $27 billion outlook.


The surprising results came on the same day that China said
it will apply anti-dumping duties to U.S. chicken, claiming
U.S. companies sell chicken feet and wings there at below

During the call, Tyson officials said they have not had a
chance to study China’s action. China said it will apply a 43.1
percent duty on Tyson’s chicken, and duties of 64.5 and 80.5
percent on other companies.

Russia has banned U.S. chicken, and Tyson said about 10
percent of its chicken exports last year went to Russia.

Domestic meat sales continue to be hurt by the recession,
but Tyson expects some improvement in restaurant sales this

While cattle and hog numbers will be smaller in 2010, the
company said supplies should be adequate for its plants. Tyson
buys the cattle and hogs for its beef and pork operations, but
raises its own chickens.

Tyson shares were up 79 cents at $14.78 at the New York
Stock Exchange, and peaked at $15.25, the highest since
September 2008

Stock Market Trading

(Editing by Derek Caney and Steve Orlofsky)

UPDATE 3-Tyson profit tops expectations, chicken improves