(Reuters) -Tyson Foods surpassed Wall Street expectations for second-quarter profit on Monday but warned that consumers are under pressure from persistent inflation.
Shares of the Springdale, Arkansas-based company sank 9%.
The biggest U.S. meat company by sales said consumers are under pressure at retail stores and food-service outlets. Its total second-quarter net sales fell 0.5% to $13.07 billion, compared with estimates of $13.16 billion, and it projected sales will stay relatively flat in fiscal 2024.
Executives told analysts on an earnings call that Tyson’s third quarter could be weaker than its fourth.
“Historically, FQ3 is typically the strongest from a seasonal perspective, so the outlook was viewed as a disappointment,” said Arun Sundaram, analyst with CFRA Research.
Tyson has shuttered six chicken plants in four states since the start of last year, laid off corporate employees and announced plans to close a pork plant, in an attempt to rein in costs.
That helped it post adjusted earnings of 62 cents per share for the second quarter, compared with analysts’ average estimate of 39 cents, based on LSEG data.
Tyson boosted its estimate for total adjusted operating income to $1.4 billion to $1.8 billion for fiscal year 2024 from a previous forecast for $1 billion to $1.5 billion.
The increased outlook and higher-than-expected earnings were not overly surprising, Citi Research analyst Thomas Palmer said. Tyson also reported better-than-expected first-quarter earnings.
The meatpacker has been attempting to turn around its chicken unit for years but struggled with excess supply in 2023. Adjusted operating margins rose to 3.9% in the latest quarter, compared to negative 3.7% a year earlier.
“The company is clearly feeling good about this business,” JP Morgan analyst Ken Goldman said in a note.
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