Tyson Foods Inc., the largest U.S. meat processor, said consumers may be shifting toward buying chicken and away from red meat after the price of beef rose at a faster pace.
Consumers feeling the pressure from increases in payroll taxes and gasoline prices are “eating different meat” rather than less of it, Chief Executive Officer Donnie Smith said during a conference call with analysts today.
“What we’re beginning to think is that with all of these pressures on consumers today, maybe we are now seeing a legitimate shift from red meat proteins into chicken,” he said.
Beef prices have risen for several years as higher feed costs and the recent U.S. drought reduced the cattle herd. Smith’s comments today may show that the move away from beef, which has been predicted for years, is perhaps finally happening, JPMorgan Chase & Co. said in a note.
Tyson rose 2.8 percent to $22.74at 1:33 p.m. in New York. The Springdale, Arkansas-based company said today net income rose to $173 million, or 48 cents a share, in the fiscal-first quarter ended Dec. 29, from $156 million, or 42 cents, a year earlier. The average of 13 analysts’ estimates compiled by Bloomberg was for 42 cents a share.
Sales climbed 0.9 percent to $8.4 billion, trailing the $8.61 billion average of 12 estimates. Full-year revenue will be about $35 billion, compared with the $34.6 billion average of 13 estimates.
Feed Costs
Domestic protein production will fall by about 1 percent in Tyson’s current fiscal year as drought conditions cut grain supplies, the company forecast. Cattle supplies may decline 2 percent to 3 percent.
Tyson said it will pay about $600 million more for chicken feed in the period. It predicted chicken and hog supplies will be little changed.
While the beef unit accounted for 40 percent of Tyson’s sales in the last financial year, it contributed 17 percent of operating profit, data compiled by Bloomberg show. Chicken made up 34 percent of revenue and 35 percent of operating income. Tyson also processes pork.
The company is working on expanding its range of processed chicken products and items for convenience stores, Smith said on a separate call with reporters.
Tyson may look at smaller so-called bolt-on acquisitions, Smith said on the media call. When asked to comment on whether Tyson is interested in purchasing Hillshire Brands Co., Smith said no. Asked to clarify if Smith meant he had no comment or no interest, he said “a little bit of both.”