Tyson Sticks to Upbeat Outlook as Swine Fever Spurs Meat Demand

Stock photo of Tyson Foods' All Natural Chicken Drumsticks in a shopping cart. ( Daniel Acker, Bloomberg )

(Bloomberg) -- Tyson Foods Inc. delivered a mixed bag of quarterly results while retaining an upbeat global meat outlook based on China’s efforts to fill a protein gap because of African swine fever and easing trade tensions.

Shares fell before the start of regular trading after quarterly sales missed estimates as soft pricing held back the chicken unit and the company cut its forecast for poultry margins. But the top U.S. meat processor delivered profit that matched expectations as beef and pork prices benefit from China’s meat shortfall.

Chief Executive Officer Noel White forecast “typical” fiscal second-quarter challenges and volatility but retained a positive long-term outlook as export markets absorb higher supplies. He made no reference to the spread of coronavirus in China.

“With improved access to global markets resulting from recent trade developments, there are reasons to be optimistic about fiscal 2020 and beyond and we are well-positioned to capitalize on opportunities in the global marketplace,” White said.

On a call that starts at 9 a.m. in New York, investors will be looking for Tyson’s guidance on how much coronavirus will disrupt trade and demand in the world’s top food buyer. Before the outbreak, meat producers were surging on the additional demand from swine fever.

Beijing’s efforts to minimize the impact of coronavirus have helped fuel a recovery this week after markets tumbled in previous weeks. Still global meat prices fell the most since 2015 in January after Asia’s rapid pork imports started to slow.

“As the fallout from ASF continues to unravel itself, we expect China to continue to ramp its imports of protein,” Stephens analyst Ben Bienvenu said in report. Tyson is expected to make steady progress throughout the year in improving operations in underperforming chicken plants.

The company should benefit from China lifting a five-year ban on imported U.S. chicken in November, as well as demand for imported pork amid African swine fever, according to Bloomberg Intelligence. The prepared foods segment should continue to see strong sales volume trends.

Tyson shares have retreated about 8% this year as part of a market-wide pullback fueled by coronavirus concerns after they surged 70% last year. The stock retreated before the start of regular trading in New York on Thursday.


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