(Reuters) – Tyson Foods surpassed Wall Street expectations for second-quarter profit on Monday, as it begins to reap the benefits of shutting some U.S. chicken processing plants to reduce costs.
Shares of the Springdale, Arkansas-based company rose 2.6% in premarket trading, after gaining more than 15% for the year so far.
The biggest U.S. meat company by sales 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.
The company is also benefiting from lower prices for animal feed, as corn and soy futures reached three-year lows in 2024. Tyson said feed ingredient costs for its chicken business fell $190 million in the quarter.
Tyson has been attempting to turn around its chicken unit after struggling with excess supply last year. Adjusted operating margins were 3.9%, compared to negative 3.7% a year earlier.
The company raised its adjusted operating income forecast from chicken to $700 million to $900 million from a previous outlook of $500 million to $700 million.
Sales were down 8.3% in the quarter, though, as prices fell 2.1%. Volumes dropped by 6.1% largely due to reduced U.S. production, Tyson said.
The meatpacker has been grappling with slowing demand from some price-conscious customers cutting back on expensive purchases amid still-high food prices and borrowing costs. Tyson’s total second-quarter net sales fell 0.5% to $13.07 billion, compared with estimates of $13.16 billion.
Volumes in the beef segment, Tyson’s largest unit, grew for the first time in five quarters, logging a 2.8% increase as producers raised cattle to heavier weights that helped offset tight inventories.
In the quarter, the operating margin in Tyson’s beef business dropped by 0.7%.
(Reporting by Granth Vanaik in Bengaluru and Tom Polansek in Chicago; Editing by Devika Syamnath, Kirsten Donovan)
